Constraints and Opportunities of Milk Production and Marketing

‫درج دمسى‬
ASSESSMENT OF OPPORTUNITIES AND CONSTRAINTS OF MILK

PRODUCTION AND MARKETING AMONG SMALLHOLDER DAIRY
FARMERS IN ARSI ROBE TOWN, SOUTHEASTERN ETHIOPIA
BY: DEREJE DEMISSIE SHASHO (M.Sc.)
JULY, 2017
ARSI ROBE, ETHIOPIA
RESUMÉ, CV
A: Personal Identification
Name: Dereje Demissie Shasho
Age: 50 Years
Sex: Male
Date of Birth: February 08, 1973
Place of Birth: Ligeba, Lode Hetosa, Arsi Zone, Ethiopia
Marital Status: Bachelor
Health Status: Excellent
Nationality: Ethiopian
Address: Arsi Robe town, Arsi Zone, Ethiopia
Mobile Phone: +251922304635; +251954687014
Email addresses: esandemissie@gmail.com; or esandemissie951@gmail.com
B: Educational History
SN Level Name of University/school Year of attendance Awards

1 Postgraduate SGS, AAU Sep. 1995-jan. 1999 M.Sc. degree
2 Undergraduate Science Faculty, AAU Sep. 1989-Nov.6, 1993 B.Sc. degree
3 Grade 12 Asella Comp. Sec. School Sep.1988-June 1989 Certificate
4 Grade 9-11 Huruta Senior Sec. School Sep. 1985-jun. 1988 Not Applicable
C: Work Experience
Employer organization Position Main Responsibilities Duration

Self-employed Consultant and - Undertaking research works in
Freelance Worker collaboration with the principal
July 1, 2007-
investigators
Present
- Supervising the activities of
investigation being undertaken,
i
- Assisting in designing database and

analyzing collected data,
- Assisting in writing up of the
research report, etc.
Rehoboth Medical - Instructing students taking different Apr. 2006- Jun.
College ICT course works related practices 2006
Chilalo University DEAN, Academic - Administrative activities Nov. 2003-Feb.
College Dean and Instructor - Managerial functions 2004
- Instructing courses
- Advising students
Jimma Teachers’ College - Lecturer - Instructing courses Sep. 1, 2000- Feb.
- Advising students 29, 2002
- Supervising laboratory works
- Conducting action and applied
research works
- Attending educational seminars and
workshops as well as other
conferences offered by experts
- Invigilating examinations
- Marking examination papers of
distance and extension program
students
- Giving tutorial sessions for distance
students as per the time table of the
college and/or MOE
Bahir Dar Teachers’ - Lecturer - Instructing courses Dec. 1, 1993 –
College - Assistant lecturer - Advising students Sep. 30. 1999
- Graduate - Supervising laboratory works
Assistant - Conducting action and applied
research works
- Invigilating examinations
- Facilitating and guiding laboratory
works
- Marking laboratory reports of
students
- Setting equipments, materials and
reagents enquired for the practical
sessions
- Attending educational seminars and
workshops as well as other
conferences offered by experts
D: Qualification Areas
Area of experience &

Examples of expertise and qualification
qualification
- Basics of the sanitation science principles, guidelines and recommendations
developed and implemented by WHO and UN member countries
Sanitation
- Assessing sanitation status of communities and prioritizing promotion and
interventional areas
- Basics of the personal hygiene principles, guidelines and recommendations
Personal Hygiene
developed and implemented by WHO and UN member countries
ii
- Assessing personal hygiene status of individuals and food handlers in urban

and rural settings as well as food and drinking establishments and prioritizing
promotion and interventional areas
- Basics of the public health related principles, guidelines and
recommendations developed and implemented by WHO and UN member
countries
Public Health
- Assessing personal public health related problems and practices, attitudes
and knowledge of individuals and HHs in urban and rural settings and
prioritizing promotion and interventional areas
- HIV culturing, phenotyping, sequencing and related issues
Human Retrovirology
- Molecular biology of HIV-1 isolates, HMA, PCR, NASBA, etc.
- Five differential, coulter counting, PBMC isolation and storage, FASCAN
Immunology
assays, etc.
Serology - ELISA, WESTERN- AND Southern blotting, Agglutination and many others
Microbiology - Almost all laboratory techniques and theoretical principles
E: Computer Related Skills and Knowledge
Area name Skills & Competencies Examples of are if relevant

Microsoft Word Excellent Processing, editing, writing, etc.
Excellent Creating; entering, exporting, analyzing, etc. of data;
Microsoft Excel
producing reports;
Excellent Creating and designing charts; entering, analyzing and editing
Microsoft Access
data, etc.
Microsoft Publisher Excellent
Microsoft Excellent Creating lecture notes, presentation of research works, etc.
PowerPoint
Very good SPSS, IBM SPSS21, Stata Version 8 to Version 12, Harvard
Utility software
Graphics, Epi-Info version 5 to version 7 and some others
Programming Good C++, Visual, Visual C+, Visual C++, Java, etc.
languages
F: Language Skills
Language type Skills

Reading Writing Speaking Understanding
English Excellent Excellent Very good Excellent
Afan Oromo Excellent Excellent Excellent Excellent
Amharic Excellent Very good Excellent Excellent
G: Publications
I: Published
[1]. HIV-1 Subtype C Syncytium- and Non-Syncytium-Inducing Phenotypes and Co-
Receptor Usage Among Ethiopian Patients with AIDS. AIDS, 1999; 13(11):1305-
1311.
II: Unpublished- I have undertaken and produced some articles listed below only as examples
iii
[1]. Retrospective Evaluation of Ceftriaxone Utilization in Inpatient Wards at Asella

Referral and Teaching Hospital, Central Ethiopia
[2]. Metronidazole Injection Use Evaluation in Inpatient Wards at Asella Referral and
Teaching Hospital, Central Ethiopia
[3]. Assessment of Preference of Pregnant Women for Place of Delivery and Factors
Associated with Institutional Delivery among Ante Natal Care (ANC) Service
Attending Women at Asella Town in Governmental Institutions, Central Ethiopia
[4]. Pregnant Women Preference of Place of Delivery and Factors Associated with
Institutional Delivery among ANC Attending Women at Asella town Governmental
Health Facilities
[5]. Magnitude, Factors Associated with Successful Vaginal Birth after Cesarean Section
and Its Outcomes in Bishoftu General Hospital, Ethiopia
[6]. Assessment of the Magnitudes and Correlates of Anemia among Pregnant Women
Attending Antenatal Care Service Clinics in Robe Didea Hospital, Southeastern
Ethiopia
[7]. Mechanical Ventilation Weaning Outcomes and Associated Factors among Patients
Admitted to Adult Intensive Care Unit of Governmental Hospitals, Addis Ababa,
Ethiopia: Cross-Sectional Retrospective Study Design
[8]. Assessment of Determinants of Client Satisfaction with Quality of Nursing Care
among Patients Admitted to Adults Ward in Adama Hospital
[9]. Prevalence of Undernutrition and Associated Factors among Family Planning
Attendants in Asella Town Governmental Health Institution, Central Ethiopia
[10]. Prevalence of Protein Energy Malnutrition (PEM) Among Children Six Months to
Five Years of Age in Bilalo Town, Arsi Zone, Ethiopia
[11]. Determinants of Utilization of Integrated Community Case Management Services for
Childhood Illnesses among Mothers in Hetosa Woreda, Arsi Zone
[12]. Prevalence of Undernutrition and Associated Factors among Adult Tuberculosis
Patients in Asella Hospital and Surrounding Health Facilities, Central Ethiopia
[13]. Peoples’ Attitude towards Using Family Planning Methods: The Case Study of Sire
Town, Central Ethiopia
[14]. Knowledge, Attitudes and Practices of Family Planning Methods among Pregnant
Mothers Attending ANC Clinic at Arsi Robe Health Center, South East Ethiopia
iv
[15]. Knowledge, Attitudes and Practices of Mothers towards Prevention and Control of
Childhood Diarrheal Diseases in Gonde Town, Central Ethiopia
[16]. And many others that I could present upon request.
H: Referees
1. Prof. Endashaw Bekele (PhD); AAU, Department of Biology, Tel.: +251947407077.

2. Prof. Yalemtsehay Mekonnen (PhD), AAU, Dept. of Biology, Tel.: +251913244396.
3. Prof. Amare Gessesse (PhD), AAU, Dept. of Biology, Tel.: +251911146855.
4. Dr. Dawit Abate (PhD); AAU, Department of Biology, Tel.: +25111114250.
5. Prof. Beyene Petros (PhD); AAU, Department of Biology, Tel.: +25111114250.
v
ABSTRACT
BACKGROUND: Lack of well-articulated knowledge about the opportunities and constraints of
milk marketing and production among urban dairy farmers affect what support and promotion
they need to actively participate in milk marketing and production. Continuous improvement and
active participation of them in milk marketing deserve an audit on the opportunities and
constraints of milk marketing and production among smallholder dairy farmers.
OBJECTIVE: Study was aimed to assess and identify milk production and marketing
opportunities and constraints among smallholder dairy farmers in Arsi Robe town, the capital
town of Robe Woreda of Arsi Zone.
METHODOLOGY: Cross-sectional survey study design was employed to assess opportunities
and constraints of milk marketing among 221 urban dairy farmers using purposive and systematic
random sampling techniques. Data was collected using questionnaire and/or interview. Various
measures were employed to control quality of study. Descriptive and inferential statistical methods
were applied to analyze collected data.
RESULTS: Two hundred thirteen smallholder urban dairy farmers participated in the study. So,
the response rate of the study was 96.38 percent. Respondents produced 120,802.5 liters of milk
per annum from local breed cows for sale while 1,476,195 liters of milk were produced for sales
per annum among the respondents from crossbreed cows. 1,596,997.5 liters of milk were produced
by dairy farmers per a year. Of the production volume, production by sellers constituted about
96.24 percent. About 65% were made available to consumers through retailer contractors and 15
percent through Wholesaler collectors. Thus, the major market outlets/channels for the respondent
farmers included local HH consumer contractors, retailer contractors and wholesaler collectors
respectively. There were unmet potential demand of 2,509,826.5 liters and unmet actual demand
of 1,501,601.21 liters for milk in Arsi Robe town per year. Therefore, they have high opportunity
for marketing fresh raw milk. Also, free options/alternatives to select the major milk marketing
outlets, low demand for imported packed, processed and powder milk among consumers, absence
of strong competitors in the area, and many others were identified as opportunities for producing
and marketing milk. Several constraints of milk production and marketing were identified by this
study like lack of adequate pasture land, high prices of animal feed or fodder, etc for same ends.
CONCLUSIONS: Findings of study reveal that high unmet demand, availability of many related
services and absence of organized competitors are the opportunities for producing and marketing
milk though there are several constraints. Therefore, proper IEC and similar intervention
strategies should be designed and implemented to promote urban dairy farmers’ awareness on
milk production and marketing in Arsi Robe town.
vi
TABLE OF CONTENTS
RESUMÉ, CV i
ABSTRACT vi
TABLE OF CONTENTS vii
ABBREVIATIONS AND ACRONYMS X
LIST OF TABLES xi
CHAPTER ONE: INTRODUCTION 12
1.1. Background of the Study 12
1.2. Statement of the Problem 16
1.3. Objectives of the Study 18
1.3.1. General Objective 18
1.3.2. Specific Objectives 18
1.4. Basic Research Questions 18
1.5. Significance of the Study 19
1.6. Delimitation of the Study 19
1.6. Limitations of the Study 19
1.7. Definitions of Key Terms 20
1.8. Organization of the paper 20
CHAPTER TWO: REVIEW OF RELATED LITERATURE 21
2.1. Introduction to Key Concepts and Ideas 21
2.2. Milk Marketing System by Smallholder Dairy Farmers 25
2.3. Milk Marketing Channels and Outlets 26
2.4. Opportunities of Smallholder Dairy Farmers in Marketing Milk 29
2.5. Constraints of Marketing Milk among Dairy Farmers 32
CHAPTER THREE: STUDY DESIGN AND METHODOLOGY 35
3.1. Study Settings and Period 35
3.2. Study Design 36
3.3. Populations 36
3.3.1. Source Population 36
3.3.2. Study Population 36
vii
3.4. Inclusion and Exclusion Criteria 37

3.4.1. Inclusion Criterion 37
3.4.2. Exclusion Criterion 37
3.5. Sample Size and Sampling Techniques 37
3.5.1. Sample Size Determination 37
3.5.2. Sampling Techniques 38
3.6. Variables of the Study 38
3.6.1. Dependent Variables 38
3.6.2. Independent Variables 38
3.7. Data Collection Instruments 39
3.8. Quality Control Measures 40
3.9. Data Processing and Analysis Methods 40
3.9.1. Data Processing Methods 40
3.9.2. Data Analysis Methods 40
3.10. Operationalized Definitions of Terms 40
3.11. Ethical Considerations 41
CHAPTER FOUR: RESULTS 42
4.1. Socio-Demographic Characteristics of Respondents 42
4.2. Production and Sales Volume of Fresh Raw Milk 43
4.3. Opportunities of The Smallholder Dairy Farmers [Self-reported] 47
4.4. Analysis of the Effects of Various Factors on Milk Marketing 48
4.5. Identified Opportunities for Marketing Milk 51
4.6. Identified Opportunities for Producing Milk 51
4.7. Identified Constraints for Marketing Milk 52
4.8. Identified Constraints for Producing Milk 52
CHAPTER FIVE: DISCUSSION 54
CHAPTER SIX: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 61
6.1. Summary 61
6.2. Conclusions 63
6.3. Recommendations 64
viii
‫‪REFERNCES‬‬ ‫‪65‬‬
‫‪ix‬‬
ABBREVIATIONS AND ACRONYMS

ADLI Agricultural Development Led Industrialization
AI Artificial Insemination
AMUL Anand Milk Union Ltd
ARDU Arsi Rural Development Unit
CADU Chilalo Agricultural Development Unit
DDE Dairy Development Enterprise
EPID Extension and Projects Implementation Department
FAO Food and Agricultural Organization
FDRE Federal Democratic Republic of Ethiopia
FINNDA Finnish International Development Agency
GDP Gross Domestic Product
IFPRI International Food Policy Research Institute
ILRI International Livestock Research Institute
IPMS Improving Productivity and Market Success
MLR Multiple Linear Regression
MOI Ministry of Information
MPP Minimum Package Program
NEPAD New Partnership for Africa’s Development
NGOs Non-Governmental Organizations
PASDEP Plan for Accelerated Sustainable Development to End Poverty
SDDPP Smallholder Dairy Development Pilot Project
SDPRP Sustainable Development Poverty Reduction Program
SIDA Swedish International Development Agency
UNDP United Nations Development Program
UNFP United Nations Food Program
UN OCHA United Nation Office for Coordination of Humanitarian Affairs
UNRRA United Nations Relief and Rehabilitation Administration
WFP World Food Program
X
LIST OF TABLES
Table Page
Table 1: Projected total number of study population and sample size of the study population per
selected Kebele administration units in Arsi Robe town, Southeastern Ethiopia, 2017
Table 2: Socio-demographic characteristics of the respondent smallholder dairy farmers who did
not sale and who sold fresh raw milk in Arsi Robe town, Southeastern Ethiopia, 2017
Table 3: Numbers & percentage values of cows, yield per cows and allotted sales volume among
the sellers and overall respondents in Arsi Robe town, Southeastern Ethiopia, 2017
Table 4: Proportions of local and crossbred cows among the farmers and the farmers that sale fresh milk,
production and sales volumes per day and per year and selling prices to different actors by the respondents
in Arsi Robe town, Southeastern Ethiopia, 2017
Table 5: Percent of fresh raw milk sold per day and volume of milk that meet extra demands among
main marketing channels per day per HH based on replies of respondents in Arsi Robe town,
Southeastern Ethiopia, 2017
TABLE 6: Volume of fresh milk marketed to the major market outlets by the respondents in Arsi Robe
town, Southeastern Ethiopia, 2017
TABLE 7: Opportunities of fresh milk marketer farmers in terms of potential and actual demands among
major the actors of marketing channels and contribution margins per year in Arsi Robe town,
Southeastern Ethiopia
Table 8: Appropriate descriptive response values for question items of the section five of the instruments
by the study participants in Arsi Robe town, Southeastern Ethiopia, 2017
Table 9: Milk production and marketing dependency test on selected variables of the study using
χ2-test among smallholder dairy farmers in Arsi Robe town, Southeastern Ethiopia, 2017
TABLE 10: Identified opportunities and constraints both for producing and marketing milk among
the respondents in Arsi Robe town, Southeastern Ethiopia, 2017
xi
CHAPTER ONE: INTRODUCTION

1.1. Background of the Study
Eastern Africa is the leading first milk-producing region in Africa; representing 68% of the
continent’s milk output (ILRI, 2013). Ethiopia, Kenya and Tanzania are among the biggest dairy
producers in Africa. As in Sub-Saharan Africa (SSA) in general, cow milk production is
predominant in Eastern Africa, followed by goat milk, sheep milk and camel milk (FAO, 2011;
SNV 2008; and UBOS, 2013). The dairy sector is one of the fastest growing agricultural sub-
sectors in Eastern African countries, which has generated significant economic returns and
employment opportunities along dairy value chains. In Rwanda, according to the 2013 National
Dairy Strategy (NDS), milk production has been rising rapidly, from 51.5 million (m) litres (l) in
2000 to 445 million litres in 2012 and continued rapid growth is expected. This rapid rise in milk
production has been attributed to a favourable policy and institutional environment and important
investments by the Government and development partners.
Ethiopia possesses the largest livestock population in Africa. Estimates for farmer holding in rural
areas indicate that the country has about 50.9 million heads of cattle, 22 million goats, 26.0 million
sheep and 2.3 million camels (CSA 2010/11). These estimates exclude the livestock population in
pastoral areas, as there are no official statistics for the same. Earlier estimates indicated that the
livestock sector contributes about 12–16% of the total GDP, and 40% of total agricultural GDP
excluding the values of draught power, transport and manure, and contributes to the livelihoods of
about 60–70% of the Ethiopian population (Winrock International 1992; Halderman 2004). A
recent IGAD study by Behnke and Metaferia (2011) showed that the value of the animal draught
power input into arable production is about a quarter (26.4%) of the value of annual crop
production, and if the value of draught power services is included, the sector contributes up to 45%
of agricultural GDP (http://www.igad-lpi. org/publication). These estimates, however, do not
again consider the non-marketable values of livestock such as social, cultural, and religious values.
Livestock serve as source of food, income, services, prestige and social status in the community.
The dairy marketing system comprises formal and informal subsystems. The formal marketing
subsystem mainly caters to urban centers while the informal subsystem operates in the rural areas.
The dairy marketing system comprises formal and informal subsystems. The formal marketing
subsystem mainly caters to urban centers while the informal subsystem operates in the rural areas.
In Sub-Saharan Africa [SSA], dairy products are marketed through both formal and informal
12
systems. The informal marketing system, which is the more dominant of the two and the most
widely practiced in the traditional production system, involves sales direct from producers to final
consumers or indirect sales through market intermediaries. The formal marketing system, which
usually serves the urban/peri-urban clientele, involves organized milk collection, processing and
distribution. In Ethiopia fresh milk is marketed through both formal and informal channels. The
informal channel involves direct and indirect sales to consumers. In direct transactions, producers
sell directly to final consumers at the farm gate, in their immediate neighborhoods or in the city of
Addis Ababa or nearby towns. Milk is transported by people on foot, by horse, by donkey or by
public or private transport. Producers also sell indirectly to consumers through itinerant traders.
Debrah & Berhanu (1991) reported that producers’ knowledge of alternative sales outlets and of
price they get would generally enhance their bargaining position and improve their chances of
getting the highest prices for their products. Producers will also have the flexibility to shift between
outlets to obtain best prices (Belachew, 1997).
There are ample opportunities for smallholder dairy farmers for marketing raw milk in the country.
Establishment of several structures and service centers such as veterinary health and artificial
insemination (AI) centers, extensive service of agricultural extension, high demand for
consumption of dairy products, huge human population with long-standing tradition of
consumption of dairy products, high rate of urbanization and income growth, availability of trained
manpower and technologies are some of the good opportunity for milk marketing. To realize these
opportunities, the extension system should be reoriented and deliver demand driven and practical
oriented dairy extension service to dairy producers that take into account the different production
systems, agro-ecology and market orientation.
The current initiation of the government in developing fundamental infrastructural facilities for dairy
development and the existence of relatively many actors in the area were the opportunities which could
enhance the competitiveness of milk marketing in the Arsi Robe town of Arsi zone. Besides, it could
provide income‐earning opportunities for milk collectors, processors and transporters in a sustainable
manner. Investing in the processing of milk and milk products could guarantee returns to both the investor
and small scale milk producers for the substitution of the currently imported milk by‐products (value added
products) with very high price tags. Conducive investment policy and expansion of basic
infrastructure, the flourishing of Micro-Financing Institutions (MFIs) and necessary services,
support and promotions are few of the opportunities among many others.
13
Furthermore, the annual rate of increase in milk yield (estimated to be 1.2%) lags behind the
increment in human population (estimated to be about 2.7% per annum) (CSA 2008) and this
resulted in large supply–demand variance for fresh milk (MoARD 2004). Azage (2003) estimated
that if the current level of milk production would be maintained, then about 6 million tonnes of
additional milk (4% increment in total milk production) is required per annum to feed the
increasing human population and narrow the gap in milk supply and demand. Thus, the country
has been spending foreign currency to import dairy products from abroad to meet domestic
demand. For instance, the country spent about 3.1 million USD in 2001 for the same purpose, and
this number increased to 9.3 million USD in 2008 (Haile 2009). The level of foreign exchange
earnings from livestock and livestock products are also much lower than would be expected, given
the size of the livestock population (Gebremedhin et al. 2007). Therefore, dairy production in
Ethiopia is anticipated to increase rapidly in response to the fast growing demand for livestock
products resulting from increasing human population, especially in urban areas, and rising
consumer income, provided that appropriate interventions are made along the dairy value chain.
According to FAO statistics, milk demand is growing at a higher rate than milk production in
Africa. Between the years 1990 and 2004, the demand for milk and dairy products in Africa was
growing at an average rate of 4.0% per annum; meanwhile production only grew at a rate of 3.1%.
Milk imports have also been increasing between 1990 and 2004 at a rate of 2.1% per annum,
showing that the gap between domestic production and consumption is also widening up. Growth
in milk consumption in Africa is pushed both by a growth in population (of 2.8% per annum) and
a small growth in per capita milk consumption of (0.8% per annum) between 1990 and 2004. Due
to population growth, land shortage in urban areas and increasing interest in production and
consumption, dairy production needs to increase greatly. The high milk demand in urban areas
drive milk production systems in areas closer to big cities to focus on milk marketing, cost
minimization and profit maximization (Fonteh et al, 2005 cited in Tegegne, Gebremedhin,
Hoekstra, Belay, and Mekasha, 2013). Unfortunately, these urban areas with the highest market
potential for milk are usually heavily populated and have limited land which is preferentially
allocated to other activities than dairying. Therefore, dairying is forced to shift to the rural areas
where there is a weaker market for milk.
Total projected population of Ethiopia is 93, 637, 751 [M= 47, 246, 289; F= 46, 391, 462] and
hence potential amount of milk consumption based on FAO’s recommendation for the same year
14
is estimated at 8, 544, 444, 779 liters. The annual milk production is estimated to be 1,089,488,251 liters
(MoARD, 2007) which doesn’t meet even the domestic demand for dairy products. As a result, the country
imports large volumes of dairy products per annum to meet the domestic demand. In 2013/14, for instance,
the country imported 457,260 kg of milk (liquid and powder) which is equivalent to 3,026,724 Birr
(MoARD, 2007). The projected demand for milk in the country is about --- liters for 2015/16 fiscal year
[or for 2008 E.C.]. The dairy sector is dominated by smallholder farmers who account for about 85% of the
population and are responsible for 98% of the milk production (MoARD, 2007).
An extreme perspective is that there are a number of challenges that deter milk marketing activities
in many Asian, Sub-Saharan African and Eastern African countries. For example, the findings of
a survey study indicated that land tenure policies and feed availability, lack of adequate dairy
services, lack of marketing outlets, and poor roads and transportation systems are the major
constraints of the dairy sector in three East African countries viz., Ethiopia, Kenya and Uganda
among other constraints (SNV, 2008). Also, traditional production and marketing channels, milk
production practices, unorganized farmer community, seasonal fluctuation, financial aspects of
dairying, role of middlemen, infrastructure, price fixation and role of government agencies were
identified as factors that affect milk marketing (Tariq, Iqbal, and Nawaz, 2008).
Despite the favorable trends described above, there are a number of serious issues that constrain
the development of the dairy sector in Eastern Africa. Generally, the productivity of dairy farmers
is relatively low. While the small scale of dairy farm operations and the lack of broad-based use
of modern farm technologies/practices and improved breeds explain a great deal of the productivity
gap with dairy farms in other parts of the world, a notable factor is the lack of access to feed.
Throughout most of the region, fodder availability is inadequate and prices are too high for
smallholder dairy farmers to access. This is constraining their milk output and their ability to
expand production. This problem is compounded by seasonal changes in pasture conditions, with
poor productivity during dry seasons. As show in Furthermore, traditional practices such as the
multiple fasting periods in Ethiopia during which no meat or animal products (including milk and
butter), are consumed, affect both the supply and demand for dairy products, which can affect the
functioning of dairy value chains (CDI, 2014).
Again, the lack of adequate transportation and cooling infrastructure in rural areas accounts for a
loss of large volumes of milk in developing countries (Ndambi et al, 2007). Birachi (2006) showed
that, on the one hand such farmers lack information on markets and prices and have a weak market
15
influence and on the other hand, retail outlets incur high transaction costs since they deal with
many small scale producers.
Thus, investigation into the issues of opportunities and constraints of milk production and
marketing among rural smallholder dairy farmers in the particular study settings was worth
addressable.
1.2. Statement of the Problem
It is generally believed that small holder dairy farmers have not fully exploited/realized/ the actual
and potential opportunities in producing and marketing milk by defending existing or perceived
challenges/constraints in most Sub-Saharan African countries. Also, alternative organizational
structures of milk production and marketing systems differ in their success to exploit the market
potential and market monopolization to achieve their respective goals of production and marketing.
In some countries, the informal milk marketing system actors have monopolized milk marketing;
and in others the informal systems and in a few both the formal and the informal systems.
Consequently, the opportunities and constraints of milk marketing systems differ from one nation
to another, and even within a particular nation from region to region and from Woreda to Woreda.
In relation to these, for instance, the formal marketing systems have been granted monopoly and/or
monopsony power over informal milk marketing systems in Kenya (Mbogoh and Ochuony, 1990).
Kenyan Cooperative Creameries [KCC] handles most of the marketed milk that is not sold and
consumed in the rural areas. The KCC was virtually the only player in the formal marketing of
milk and milk products in Kenya. Whereas, the informal milk marketing subsystem deals with
marketed milk that does not enter the formal marketing subsystem. Henson (1990) reported similar
dominance in rural Zimbabwe. The fact that only a small proportion of the milk produced in
Tanzania (Ashimogo and Kurwijila, 1990) and in Ethiopia (Debrah,1990) is marketed by
commercial enterprises implies that nearly all traditionally produced dairy products are marketed
through traditional, informal marketing channels. The major actors of milk marketing system,
therefore, had different opportunities and faced different challenges in these countries and other
SSA countries as well as in Some Asian nations. Milk production and marketing in Pakistan is
dominated mainly by the informal private sector, consisting of various agents, each performing a
specialized role at a particular point in the supply chain. Traditional production and marketing
channels, milk production practices, unorganized dairy farmers’ community, seasonal fluctuation,
16
financial aspects of dairying, role of middlemen, infrastructure, price fixation and role of
government agencies were identified as milk marketing system constraints (Zia, 2008).
Underdevelopment and lack of market-oriented production, lack of adequate information on
livestock resources and market information, inadequate marketing infrastructures, presence of
trans-boundary animal diseases, and illegal trades are the major factors affecting livestock
marketing in Ethiopia (Solomon et al. 2003). Among others, land tenure policies; feed availability,
lack of adequate dairy services, lack of marketing outlets, and poor roads and transportation
systems are the major constraints of the dairy sector in three East African countries viz., Ethiopia,
Kenya and Uganda (SNV, 2008).
The major opportunities for the development of the dairy sector in Ethiopia include high demand
for milk, presence of enabling policy that encourages investment in the dairy sector, absence of
competitors, and easy access to transportation systems as well as the presence of Agricultural
Development Extension Workers deployed by government besides animal health service providers
to almost all rural farmers’ association Kebeles to inform, educate and communicate the major
actors especially milk producer farmers at their door front. Moreover, as the informal marketing
subsystems tend to be low-cost operations and that they are in a position to pay higher prices to
producers (Mbogoh, 1984).
The rural market is characterized by poor roads and communications; considerable distances to be
covered in limited time, particularly if the cold-chain is to be maintained; seasonal demand, i.e.
less demand in summer when local milk is available; low buying power; competition from either
commercial powdered milk or, as a food, from vegetables and meat; and finally the whim of the
consumer-milk products are, to some extent, impulse-purchase items, even in the rural areas
(Henson, 1990).
Efforts to boost collection, processing and marketing of locally produced milk have been hampered
by financial, technical and policy constraints (Ashimogo and Kurwijila, 1990). They also found
that fragmented and scattered production units increase collection costs as well as lack of
coordination in dairy development with regard to the appropriate location of processing plants has
also contributed to high milk collection costs as other constraints.
Majority of the studies previously undertaken and reported by researchers over-emphasized
opportunities and constraints of milk marketing across rural and pastoralist settings and among
dairy Cooperatives and other issues [Kedir Amare, 2010; Moti Jaleta, et al., 2013]. However, only
17
very few studies have addressed the opportunities and constraints of milk marketing among
smallholder dairy farmers in the rural settings. Given the paucity of empirical studies on the farm-
level economics of milk production and milk marketing in Ethiopia in general, in Arsi Robe town
in particular has resulted in a great lack of knowledge on opportunities and constraints of milk
marketing among smallholder dairy farmers in Arsi Robe town, Southeastern Ethiopia.
Thus, in order to mitigate challenges that limit productivity and thereby exploit the untapped
potential, it is necessary to characterize and analyze dairy production and marketing systems,
identify major constraints and devise pertinent and practical strategies to alleviate the problem and
improve dairy production and marketing systems in the country in general, and in Arsi Robe town,
Southeastern Ethiopia in particular.
1.3. Objectives of the Study
1.3.1. General Objective
The aim of this paper was to assess and identify milk [production and] marketing related
opportunities and constraints among smallholder dairy farmers in Arsi Robe town, Southeastern
Ethiopia; and hence to identify opportunities for future market development to enhance
productivity of smallholder urban and semi-urban dairy farmers.
1.3.2. Specific Objectives
The specific objectives of the study included:
1. To determine opportunities of smallholder dairy farmers for producing their milk,
2. To determine opportunities of smallholder dairy farmers for marketing their milk,
3. To identify constraints that face smallholder dairy farmers in producing milk,
4. To identify constraints that face smallholder dairy farmers in marketing milk, and
5. To forward appropriate and relevant recommendations based on the findings of the study.
1.4. Basic Research Questions
Related to the problem, the research seeks to address the following questions
1 What are the opportunities for producing milk?
2 What are the opportunities for marketing milk and milk products?
3 What are the constraints that compromise milk production?
4 What factors affect marketing milk and milk products?
5 What interventional strategies should need to be designed to overcome the influences of
factors affecting milk production and marketing among the smallholder dairy farmers at the
18
specific study settings?

1.5. Significance of the Study
The findings of the study would help regulatory laws enforcement machinery, and stakeholders in
designing, developing and implementing appropriate intervention strategies, and in
launching/providing awareness creation campaigns and promotion of the major actors with due
emphasis to the smallholder milk producer farmers. Moreover, they would enrich empirical
findings in the thematic areas of the study. Still, they would broaden and deepen the existing body
of knowledge. Consequently, they would contribute a lot towards profit maximization,
encouraging the smallholder milk producer farmers though this significance is indirect benefits of
the study.
1.6. Delimitation of the Study
The study was delimited to assessment of opportunities and constraints of milk marketing among
smallholder’s dairy farmers living only in three selected Farmers’ Association Kebeles out of 15
administration Kebeles existing in Arsi Robe town, Southeastern Ethiopia. The study did not
investigate marketing of other dairy products among the selected smallholder dairy farmers except
raw/fresh milk. Moreover, it did not address milk marketing system among other middlemen or
actors of milk marketers in the specific study settings. It addressed issues development of future
milk marketing systems that might be more profitable to the smallholder dairy farmers. It employs
farmer-based approach rather than other study systems or approaches in addressing the major
thematic issues of the study.
1.6. Limitations of the Study
Since the study is delimited to only three Farmers’ Association Kebeles in Arsi Robe town,
Southeastern Ethiopia; the opportunities and constraints of milk marketing among smallholder
dairy farmers might have not hold for other smallholder dairy farmers living in different Farmers’
Association Kebeles though the selected Kebeles and smallholder dairy farmers were
representative for all similar farmers living in Arsi Robe town, Southeastern Ethiopia. Lack of
adequate financial resources and time compelled the study to be confined to smallholder dairy
farmers living only in Arsi Robe town, Southeastern Ethiopia. Thus, the issues of width, breadth
and coverage were some of the limitations of the study. Due to the same reasons, the study heavily
relied on the responses of the study rather than exploring actual and potential opportunities and
constraints of milk marketing using deeper and systematic investigation of the issues.
19
In general, coverage, width and breadth, lack of adequate financial resources and time as well as
relying only on the responses of the respondents were some of the limitations of the study.
1.7. Definitions of Key Terms
Market: The set of all actual and potential buyers of a product or service (Kotler and Armstrong
(1987).
Marketing: the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods, and services to create exchanges that satisfy individual and
organizational objectives.
Milk is the simple products or processed milk or food obtained from milk. Among the type of milk
used, the principal is by far the cow milk. It is one of the best sources of calcium that provide high
quality protein, vitamins and other minerals.
Opportunities are situations or set of positive externalities arising a business’ strengths, that can
be used to improve business’ competitive position and provide possibilities for a business expand
so as to make more sales and profits.
Constraints: - are those factors that limit the ability to large volume of milk and to increase
volume of sales and potential profit.
1.8. Organization of the paper
This research proposal has six main chapters excluding the cover pages, the frontiers (i.e.,
acknowledgements, abstracts, table of contents and list of abbreviations and acronyms), and the
annexes. Chapter one followed the frontiers and it presents background of the study, statement of
the problem, objectives and significance of the study, scope and limitations, and operational
definition of key terms. Section two is literature review. In this section, related theoretical and
empirical literatures are reviewed to establish opportunities and constraints of milk marketing
among smallholder dairy farmers in Arsi Robe town, Southeastern Ethiopia. It encompasses study
settings and period, design of the study, target population, sample size and sampling techniques,
data collection instruments, methods of data analysis and processing, and quality control measures.
In section four the results of the study are detailed. This section is followed by discussion. In
section six appropriate and necessary summary, conclusions and recommendations are presented.
Next to section six, cited references are acknowledged; and the instruments are annexed.
20
CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1. Introduction to Key Concepts and Ideas
Eastern Africa is the leading first milk-producing region in Africa; representing 68% of the
continent’s milk output (ILRI, 2013). Ethiopia, Kenya and Tanzania are among the biggest dairy
producers in Africa. As in Sub-Saharan Africa (SSA) in general, cow milk production is
predominant in Eastern Africa, followed by goat milk, sheep milk and camel milk (FAO, 2011;
SNV 2008; and UBOS, 2013). The dairy sector is one of the fastest growing agricultural sub-
sectors in Eastern African countries, which has generated significant economic returns and
employment opportunities along dairy value chains. In Rwanda, according to the 2013 National
Dairy Strategy (NDS), milk production has been rising rapidly, from 51.5 million (m) litres (l) in
2000 to 445 m l in 2012 and continued rapid growth is expected. This rapid rise in milk production
has been attributed to a favourable policy and institutional environment and important investments
by the Government and development partners.
Ethiopia possesses the largest livestock population in Africa. Estimates for farmer holding in rural
areas indicate that the country has about 50.9 million heads of cattle, 22 million goats, 26.0 million
sheep and 2.3 million camels (CSA 2010/11). These estimates exclude the livestock population in
pastoral areas, as there are no official statistics for the same. Earlier estimates indicated that the
livestock sector contributes about 12–16% of the total GDP, and 40% of total agricultural GDP
excluding the values of draught power, transport and manure, and contributes to the livelihoods of
about 60–70% of the Ethiopian population (Winrock International 1992; Halderman 2004). A
recent IGAD study by Behnke and Metaferia (2011) showed that the value of the animal draught
power input into arable production is about a quarter (26.4%) of the value of annual crop
production, and if the value of draught power services is included, the sector contributes up to 45%
of agricultural GDP (http://www.igad-lpi.org/publication). These estimates, however, do not again
consider the non-marketable values of livestock such as social, cultural, and religious values.
Livestock serve as source of food, income, services, prestige and social status in the community.
On the other hand, Ethiopia has a huge potential for dairy development in Africa. The large and
diverse livestock genetic resources, existence of diverse agro-ecologies suitable for dairy
production, increasing domestic demand for milk and milk products, better market opportunity,
and proximity to international markets indicate the potential and opportunities for dairy
development in the country. However, dairy development has been hampered by multi-faceted,
21
production system-specific constraints related to genotype, feed resources and feeding systems,
access to services and inputs, low adoption of improved technologies, marketing and absence of
clear policy support to the sector.
East Africans are relatively important consumers of milk and dairy products compared to other
African countries. Generally, milk consumption is rising although there are disparities among
eastern African countries. Population growth, urbanisation, rising incomes and changing lifestyles
are the main drivers of this trend. In Kenya, annual per capita milk consumption estimates vary
between 80 and 100 l, which is the highest in Africa. Furthermore, milk consumption by Kenyans
is growing at 2 to 3% per year. Due to this rapid growth, demand is outstripping supply in Kenya
(according to the Kenya Dairy Board), which is creating tensions in the raw milk market.
According to the 2010 Kenya Dairy Master Plan, domestic demand was expected to more than
double by 2030, increasing from 110 to 220 m l, given population growth projections and current
trends in milk utilisation (total utilisation projected to rise to 12.8 billion l). In contrast, in Rwanda,
per capita milk consumption is relatively low, estimated at 40 l per year. According to the 2013
NDS, consumer demand for both raw and processed milk is not increasing fast enough to clear
projected raw milk supplies. In Tanzania and Uganda, milk consumption is also lower than in
Kenya, with people consuming 40 and 45 l of milk per capita and per year (FAO, 2011).
On the supply side, the production of dairy products is increasing but trends differ among countries
in the region. From a heavily state-managed industry, with the objective of satisfying domestic
food consumption and nutrition needs, to the reforms that led to a private-sector-driven industry,
especially in the processing sector, the eastern African dairy production and marketing has gone
through a broad-ranging transformation, especially over the past decade. During that period, there
has been an increase in private investment in dairy processing and intensive dairy cattle systems,
around which improved husbandry, improved breeds, and feed systems were developed, adopted
and disseminated, with many dairy farmers settling in and around urban areas through a process
of sedentarization. This led to an increase in productivity and production. At the same time, the
range of products offered in the market has expanded.
While dairy products used to be limited essentially to raw milk and pasteurised milk, consumers
can now access a range of processed products, including UHT milk, fermented milk (or traditional
sour milk), butter, cheese, yoghurt, milk powder and so forth.
22
Dairying in Eastern Africa essentially remains a domestic, or even localised, business. In the
Eastern Africa Community (EAC), only 10 to 20% of the raw milk supply, depending on the
country and sources, is marketed and distributed through formal channels, whereas less than one
per cent of dairy products are exporters within or outside the region. To a large extent, this is
explained by the fact that milk and dairy products are difficult to trade due to their perishability,
tropical temperatures that exacerbate the perishability issue and also to the relatively high costs of
trading across borders in the region (World Bank. 2010). Yet, recent data show that intra-regional
trade in dairy products is slowly rising. In recent years, Uganda has become the first exporter of
dairy products in the region, with its dairy exports valued at USD24.6 in 2013 (including both the
regional and overseas markets). About four-fifths of Ugandan dairy exports were destined to
Kenya. The other markets were the Democratic Republic of Congo (DRC), South Sudan and
Sudan.
In Ethiopia dairy production depends mainly on indigenous livestock genetic resources; more
specifically on cattle, goats, camels and sheep. Cattle has the largest contribution (81.2%) of the
total national annual milk output, followed by goats (7.9%), camels (6.3%) and sheep (4.6%)
[CSA, 2009]. Despite its potential for dairy development, productivity of indigenous livestock
genetic resources in general is low, and the direct contribution it makes to the national economy is
limited. For example, in 2009 average cow milk production was estimated at only 1.54 liters/cow
per day (CSA, 2009), and the per capita milk consumption was only about 16 kg/year, which is
much lower than African and world per capita averages of 27 kg/year and 100 kg/year, respectively
(FAOSTAT 2009). A recent report by CSA (2010/11) indicated that the total production of cow
milk is about 4.06 billion liters, and this translates to an average daily milk production/cow is of
23
1.86 liters/day. The MoA (2012) also reported some improvement in per capita consumption of
milk and estimated it at 19.2 kg.
that if the current level of milk production would be maintained, then about 6 million tones of
According to the synthesis of a series of thesis studies funded by Improving Productivity and
Market Success (IPMS) of Ethiopian farmers’ project across its Pilot Learning Woredas (PLWs)
and other sites in three Regional States (namely Bure, Fogera and Metema in Amhara Region,
Shashemene and Mieso in Oromia Region, and Hawassa, Yirgalem/Dale and Dilla in Southern
Nations, Nationalities and Peoples (SNNP) Region) representing different agro-ecologies and
production systems indicated that dairy production is an important component of livestock farming
in Ethiopia. The huge and diverse livestock population, varied and favorable agro-ecology for
dairying, increasing demand for dairy products in urban and peri-urban areas, long-standing
culture of dairy products consumption, and favorable policy are indicators of the importance and
potential of dairying in the country. However, productivity of dairy animals in general is limited.
This results in shortage of supply of dairy products and requires the country to spend hard currency
to import dairy products from abroad. Therefore, it has been proposed that it’s essential to explore
the existing dairy production environment, analyze constraints of dairy production, identify
opportunities for dairy development, and devise pertinent and workable strategies for sustainable
market-oriented dairy development in the country.
24
Milk plays a vital role in building a healthy society and can be used as vehicle for rural
development, employment and slowing down the migration of the rural population. Milk and milk
products provide nearly one third of world's intake of animal protein (FAO, 1998).
Milk production and marketing in Pakistan is dominated mainly by the informal private sector,
consisting of various agents, each performing a specialized role at a particular point in the supply
chain. These consist of producers, collectors, middlemen, processors, traders, and consumers. Only
3-5% of total production in the country is marketed through dairy cooperatives. The remaining 95-
97% is produced and marketed in raw form by informal agents in the marketing chain (Zia, 2006).
Milk produced in Kenya derives from cattle, sheep, goats and camels, depending on the agro-
ecological zone, but cattle are the main source of milk. Camels are important only in the more arid
areas of the country. Marketed milk accounts for only about 40% of the estimated annual milk
production in Kenya. Most of the milk marketed is handled by Kenya Cooperative Creameries
Limited (KCC), which has both a virtual monopsony over purchases of raw milk at the farm level
and monopoly power over the sales of processed milk, particularly in urban areas.
Milk is classified as a scheduled commodity in Kenya, i.e. its pricing and marketing are subject to
government regulation and control. Government control and influence over the dairy industry in
Kenya are, by law, delegated to the Kenya Dairy Board (KDB), a statutory agency that was
established under the Dairy Industry Act (Chapter 336 of the Laws of Kenya) of 1958 (Mbogoh,
and Ochuonyo, 1990).
In Sub-Saharan Africa [SSA], dairy products are marketed through both formal and informal
systems. The term ‘‘informal’’ is often used to describe marketing systems in which governments
do not intervene substantially. Such marketing systems are also referred to as parallel markets. The
term ‘‘formal’’ is thus used to describe government (official) milk marketing system.
The findings of Anh, Cuong and Nga (2013) revealed that farmers produce milk and different
marketing systems outlet different qualities of milk to two main buyers.
2.2. Milk Marketing System by Smallholder Dairy Farmers
In Sub-Saharan Africa [SSA], the informal marketing system is the more dominant system of milk
marketing and the most widely practiced system in the traditional production system. It involves
sales of milk direct from producers to final consumers or indirect sales through market
intermediaries or middlemen/actors of the milk marketing systems.
25
In Ethiopia, fresh milk is marketed through the informal channel through direct and indirect sales
of raw/fresh milk to consumers. In direct transactions, producers sell directly to final consumers
at the farm gate, in their immediate neighborhoods or in the city or nearby towns. Milk is
transported by people on foot, by horse, by donkey or by public or private transport. Producers
also sell indirectly to consumers through itinerant traders (Debrah, 1990).
Unlike Ethiopia, smallholder dairy farmers practice formal milk marketing system in Kenya as
they are organized into Kenyan Farmers Dairy Cooperative Societies (KFDCS). Thus, the highest
volume of milk produced by smallholder Kenyan farmers is sold through their cooperatives.
Although very low in magnitude and amount/volume of milk sold through informal marketing
system, informal milk marketing system also exists in the market in Kenya too. The operations of
the formal and informal milk marketing subsystems in Kenya have suggested that the two
subsystems are interlinked, particularly because the very existence of the informal subsystem
reflects the existence of small-scale milk producers, and small-scale milk producers often depend
on FDCS for marketing their surplus milk, and such FDCS often depend on the formal marketing
subsystem to dispose of milk that they cannot sell to local consumers (Mbogoh, and Ochuonyo,
1990).
Informal, small-scale markets control over 90% of marketed milk in the country, and hence
producers sell their milk to anyone whom they come across every day (Tilahun, H., and Schmidt,
E., 2012; SNV, 2008; Geleti, D., Hailemariam, M., Mengistu, A., and Tolera, A., 2014; Debrah,
S., 1990; Debrah, S. H., and Berhanu Anteneh, 1991; Belachew, H., 1997; Bedilu Demissie,
Komicha, H. H., and Adem Kedir, 2014).
2.3. Milk Marketing Channels and Outlets
The market outlets/channels for smallholder dairy farmers in the milk marketing systems are
different based on the findings of the empirical studies done in various Asian and African countries
at different periods. For instance, the main market channels for smallholder farmers include
individual consumers (local consumers), the cooperatives, retailer contractors, and wholesaler
collectors except in some African countries like Kenya where they are organized or encompassed
by farmers’ dairy cooperative societies (KFDCS). The main channels for wholesaler collectors are
the cooperatives and retailer contractors; but for the cooperatives and retailer collectors are
individual consumers.
26
The informal sector handles about 85% of the marketed milk output through milk hubs (or “dairy
societies/associations”), milk kiosks, schools, restaurants, and also to large processors and the
cottage industry in need of raw milk to complement their main supply sources. Actually, most
large processors have established arrangements with milk collection centers to secure supplies of
raw milk, including by owning them in some cases, especially in major milk catchment areas. For
instance, SALL in Uganda owns 150 collection centers and 10 bulking centers (bulking centers
are collection facilities supplied by several collection centers and they are usually managed by
large companies). Yet, the competition is stiff in the raw milk market between formal actors and
informal traders and retailers. Informal traders can collect the milk from the farms, offer relatively
high prices as well as cash payments and credit to dairy farmers and milk hubs, thanks to their
lower marketing costs. This competition, in turns, makes it difficult for different operators
(including collection centers) to establish and maintain formal value chain relations and ensure
that the raw milk supply is stable and that certain quality standards are followed. On the one hand,
informal channels provide undeniably benefits to farmers and traders by allowing them to secure
their livelihoods and to low-income consumers by supplying them with affordable milk; but on the
other hand it can constitute an obstacle to the development of value chains. Besides, informality
may entail a loss of fiscal receipts, makes it difficult to apply regulatory standards, and create food
safety risks.
Kenyan Cooperative Creameries [KCC] handles most of the marketed milk that is not sold and
consumed in the rural areas. Since its incorporation in 1925 and until the licensing of the Meru
Central Farmers’ Cooperative Union (MCFCU) and the Kitinda Dairy Farmers Cooperative
Society (KDFCS) as dairy processors in 1983 and 1986, respectively the KCC was virtually the
only player in the formal marketing of milk and milk products in Kenya. The KCC has two types
of members, namely the private members (individual but large-scale dairy farmers or companies)
and cooperative members (primarily the dairy farmers’ cooperative societies, consisting of small-
scale dairy farmers (Mbogoh, and Ochuonyo, 1990).
As defined, the informal milk marketing subsystem deals with marketed milk that does not enter
the formal marketing subsystem. This implies that the parties involved in this subsystem do not
operate under the licensing and blessing of the KDB, or as the agents of a licensed dealer such as
the KCC. This subsystem involves sales of raw milk by producers to consumers or by producers’
agents to consumers. It may also involve hawking of milk from home to home in the rural areas
27
by itinerant traders who do not usually need or seek licenses to do such business (Mbogoh, and
Ochuonyo, 1990).
Marketing of raw milk and milk products through the informal marketing subsystem is permissible
and tolerated in areas that have not been ‘zoned-off’ by the KDB. Hence the informal milk
marketing subsystem is especially important in rural areas. However, it also operates in ‘‘zoned’’
(urban) areas, even though the parties involved know that the transactions are illegal (Mbogoh,
and Ochuonyo, 1990).
In Kenya, most small-scale dairy farmers market their milk through their farmers’ dairy
cooperative societies (FDCS). These societies serve two main functions: (a) collection of milk
from their members, who often are widely dispersed, and (b) delivery of that milk to their
customers (Mbogoh, and Ochuonyo, 1990).
According to the finding of Debrah (1990), five milk marketing systems for fresh milk were
identified in Addis Ababa. These are: (I) direct sales to consumers by producers (system S1), (ii)
sales to consumers by kebele3 shops and other government sales outlets (i.e. outlets other than
grocery stores, supermarkets and small private shops or kiosks) (S2), (iii) sales to consumers by
itinerant traders (S3), (iv) sales to consumers by small private shops and kiosks (S4) and (v) sales
to consumers by grocery stores and supermarkets (S5).
Furthermore, she established that the S1 system had three subsystems:
a) S11: purchases of milk directly from producers whose cows are kept in the same keeled
where the consuming households live
b) S12: purchases of milk from producers whose cows are kept within Addis Ababa but
outside the keeled of the consuming households and
c) S13: purchase of milk from producers whose cows are kept outside Addis Ababa (Debrah,
1990).
Her findings also demonstrated that the general dominance of the direct sales from producers to
consumers (S1). However, systems S2 and S4 are also important, particularly in the inner and
middle zones of the city. Again, assessment of the relative importance of the three S1 subsystems
in the different zones of Addis Ababa indicated that subsystem S11 was dominant in the peripheral
zone, while subsystem S12 was dominant in the middle and inner zones. Subsystem S13 was
relatively unimportant in all three zones.
28
About 90% of the milk produced by smallholder milk producers sold through formal or informal
channels, whereas the remaining 10% is retained for the own consumption of households and for
feeding calves.
The collection and bulking of raw milk from farmers is the first step in the marketing chain. Milk
channeled onto the market is delivered through a diverse range of actors in the informal and formal
chains, including collectors, transporters, and traders operating on the informal market, and
collection agents, transporters or employees operating on behalf of the processing companies. Milk
collection centers, also called “milk hubs”, facilitate this step.
The competition is stiff in the raw milk market between formal actors and informal traders and
retailers. Informal actors can collect the milk from the farms, offer relatively high prices as well
as cash payments and credit to dairy farmers and milk hubs, thanks to their lower marketing costs.
This competition, in turns, makes it difficult for different operators (including collection centers)
to establish and maintain formal value chain relations and ensure that the raw milk supply is stable
and that certain quality standards are followed. On the one hand, informal channels provide
undeniably benefits to farmers and traders by allowing them to secure their livelihoods and to low-
income consumers by supplying them with affordable milk; but on the other hand it can constitute
an obstacle to the development of value chains. Besides, informality may entail a loss of fiscal
receipts, makes it difficult to apply regulatory standards, and create food safety risks.
2.4. Opportunities of Smallholder Dairy Farmers in Marketing Milk
Naturally endowed with different agro-ecological zones and suitable environmental conditions,
Ethiopia is a home for many livestock species and suitable for livestock production. Ethiopia is
believed to have the largest livestock population in Africa (CSA 2013; Solomon et al. 2003;
Tilahun and Schmidt 2012). An estimate indicates that the country is a home for about 54 million
cattle, 25.5 million sheep and 24.06 million goats. From the total cattle population 98.95% are
local breeds and the remaining are hybrid and exotic breeds. 99.8% of the sheep and nearly all goat
population of the country are local breeds (CSA 2013).
The major opportunities for the development of the dairy sector in the country include high demand
for milk, presence of enabling policy that encourages investment in the dairy sector, absence of
competitors, and easy access to transportation systems among much other potential to be exploited
fully (Ndambi et al, 2009; FAOSTAT, 2013; Haile, 2009; ILRI, 2013).
29
East Africans are relatively important consumers of milk and dairy products compared to other
African countries. Generally, milk consumption is rising although there are disparities among
eastern African countries. Population growth, urbanisation, rising incomes and changing lifestyles
are the main drivers of this trend. In Kenya, annual per capita milk consumption estimates vary
between 80 and 100 l, which is the highest in Africa. Furthermore, milk consumption by Kenyans
is growing at 2 to 3% per year. Due to this rapid growth, demand is outstripping supply in Kenya
(according to the Kenya Dairy Board), which is creating tensions in the raw milk market.
According to the 2010 Kenya Dairy Master Plan, domestic demand was expected to more than
double by 2030, increasing from 110 to 220 m l, given population growth projections and current
trends in milk utilisation (total utilisation projected to rise to 12.8 billion l). In contrast, in Rwanda,
per capita milk consumption is relatively low, estimated at 40 l per year. According to the 2013
NDS, consumer demand for both raw and processed milk is not increasing fast enough to clear
projected raw milk supplies. In Tanzania and Uganda, milk consumption is also lower than in
Kenya, with people consuming 40 and 45 l of milk per capita and per year (FAO, 2011).
On the supply side, the production of dairy products is increasing but trends differ among countries
in the region. From a heavily state-managed industry, with the objective of satisfying domestic
food consumption and nutrition needs, to the reforms that led to a private-sector-driven industry,
especially in the processing sector, the eastern African dairy production and marketing has gone
through a broad-ranging transformation, especially over the past decade. During that period, there
has been an increase in private investment in dairy processing and intensive dairy cattle systems,
around which improved husbandry, improved breeds, and feed systems were developed, adopted
and disseminated, with many dairy farmers settling in and around urban areas through a process
30
of sedentarization. This led to an increase in productivity and production. At the same time, the
range of products offered in the market has expanded.
On the other hand, Ethiopia has a huge potential for dairy development in Africa. The large and
diverse livestock genetic resources, existence of diverse agro-ecologies suitable for dairy
production, increasing domestic demand for milk and milk products, better market opportunity,
and proximity to international markets indicate the potential and opportunities for dairy
development in the country. However, dairy development has been hampered by multi-faceted,
production system-specific constraints related to genotype, feed resources and feeding systems,
access to services and inputs, low adoption of improved technologies, marketing and absence of
clear policy support to the sector.
In Ethiopia dairy production depends mainly on indigenous livestock genetic resources; more
specifically on cattle, goats, camels and sheep. Cattle has the largest contribution (81.2%) of the
total national annual milk output, followed by goats (7.9%), camels (6.3%) and sheep (4.6%)
[CSA, 2009]. Despite its potential for dairy development, productivity of indigenous livestock
genetic resources in general is low, and the direct contribution it makes to the national economy is
limited. For example, in 2009 average cow milk production was estimated at only 1.54 liters/cow
per day (CSA, 2009), and the per capita milk consumption was only about 16 kg/year, which is
much lower than African and world per capita averages of 27 kg/year and 100 kg/year, respectively
31
According to FAO statistics, milk demand is growing at a higher rate than milk production in
Africa. Between the years 1990 and 2004, the demand for milk and dairy products in Africa was
growing at an average rate of 4.0% per annum; meanwhile production only grew at a rate of 3.1%.
Milk imports have also been increasing between 1990 and 2004 at a rate of 2.1% per annum,
showing that the gap between domestic production and consumption is also widening up. Growth
in milk consumption in Africa is pushed both by a growth in population (of 2.8% per annum) and
a small growth in per capita milk consumption of (0.8% per annum) between 1990 and 2004. Due
to population growth, land shortage in urban areas and increasing interest in production and
consumption, dairy production needs to increase greatly. The high milk demand in urban areas
drive milk production systems in areas closer to big cities to focus on milk marketing, cost
minimization and profit maximization (Fonteh et al, 2005 cited in Tegegne, Gebremedhin,
Hoekstra, Belay, and Mekasha, 2013). Unfortunately, these urban areas with the highest market
potential for milk are usually heavily populated and have limited land which is preferentially
allocated to other activities than dairying. Therefore, dairying is forced to shift to the rural areas
where there is a weaker market for milk. The lack of adequate transportation and cooling
infrastructure in rural areas accounts for a loss of large volumes of milk in developing countries
(Ndambi et al, 2007). Birachi (2006) showed that, on the one hand such farmers lack information
on markets and prices and have a weak market influence and on the other hand, retail outlets incur
high transaction costs since they deal with many small scale producers.
2.5. Constraints of Marketing Milk among Dairy Farmers
Despite the favorable trends described above, there are a number of serious issues that constrain
the development of the dairy sector in Eastern Africa. Generally, the productivity of dairy farmers
is relatively low. While the small scale of dairy farm operations and the lack of broad-based use
of modern farm technologies/practices and improved breeds explain a great deal of the productivity
32
Efforts to boost collection, processing and marketing of locally produced milk have been hampered
by financial, technical and policy constraints. This section gives a brief account of the major
problems. Shortage of foreign exchange and local funds for the purchase of essential spares for the
processing and cooling machines, chemicals, cultures and packaging materials has long limited
milk processing capacity. Poor roads, leading to breakdown of vehicles and difficulties in
collecting milk during the rainy seasons when more milk is available for collection, result in low
milk intake and high collection costs. Inadequate milk collection vehicles and lack of spares for
maintenance have compounded this problem (Ashimogo, and Kurwijila, 1990).
The findings of Anh, Cuong and Nga (2013) revealed that smallholder dairy farmers produce milk
under the constraints of high input prices, feed scarcity, exploitation by downstream actors, capital
investment inadequacy, inadequate poor market information and knowledge, lack of technical
support from dairy manufacturer and local authority, land limit, and cow diseases.
The processing facilities have long been underutilized because of low milk intake, power supply
problems, water problems and machinery breakdowns. This has resulted in low income generation,
leading to lack of a surplus for capital investment. Fragmented and scattered production units
increase collection costs. Lack of coordination in dairy development with regard to the appropriate
location of processing plants has also contributed to high milk collection costs (Ashimogo, and
Kurwijila, 1990).
Among others land tenure policies, feed availability, lack of adequate dairy services, lack of
marketing outlets, and poor roads and transportation systems are the major constraints of the dairy
sector in three East African countries viz., Ethiopia, Kenya and Uganda (SNV, 2008).
Underdevelopment and lack of market-oriented production, lack of adequate information on
livestock resources and market information, inadequate marketing infrastructures, presence of
trans-boundary animal diseases, and illegal trades are the major factors affecting livestock
marketing in Ethiopia (Solomon et al. 2003). The study indicates that livestock production is
33
positively correlated with infrastructure. The larger portion of the country landmass (75%) which
has no or poor livestock marketing infrastructures is found to have a sparse livestock population
(Bedilu Demissie, Komicha, and Adem Kedir, 2014).
34
CHAPTER THREE: STUDY DESIGN AND METHODOLOGY

3.1. Study Settings and Period
Arsi Robe town has the area coverage of 1598.33 m2 which is the capital town of Robe Woreda,
Arsi Zone, Southeastern Ethiopia. Robe Woreda has the area coverage of 635km2 which is found
in the north west part is bordered by Amigna Woreda, Shirka Woreda in the south east, Seru
Woreda in the north, Tena in the east, Sude Woreda in the west, Hamda Diksis in south and Wabe
Shebelle River in the north east. Arsi Robe town is the capital town of Robe Woreda. The district
is characterized by plains, valleys and hills. The climatic condition of Robe Woreda is totally
Woina Dega. The major rivers of the district are Robe and Kechino. Total projected rural
population for Arsi Robe town based on the results of NHPC results/reports for Oromia Regional
state is 29,035 [M=14802; F= 14233] for 2017. Thus, there are 3, 135 HHs in the town (Arsi Robe
town administrative office report, 2016).
Rapidly increasing population size with a growing urbanization is resulting in a growing demand
for dairy products in Ethiopia. Total projected rural population of Arsi Robe town is 29,035
[M=14802; F= 14233] for 2017. Accordingly, potential demand for milk based on FAO’s
recommendation per year is about 4, 106,824 liters for overall population living in the Woreda but
production volume is only 75,842 liters per year (FAO; 2013; Arsi Robe Town Urban Agriculture
Office Report, 2016). This means that there are huge opportunities for the town’s smallholder dairy
farmers even to exploit at local level least consideration of exporting.
Arsi Robe town of the Robe Woreda was selected as study settings in the study because it is a
province where the principal researcher can easily get primary data and conduct the investigation
at closer scrutiny than any other setting. Moreover, the district is famous for its huge livestock in
terms of number as compared to other Woredas in the Zone. Again, more productive exotic dairy
breeds are highly prevalent among the town’s smallholder dairy farmers as compared to other
settings. Furthermore, since the town is the site of most Governmental and Non-Governmental
Offices and their workers operating in the Woreda, it was assumed that there were high
opportunities to produce and market milk and milk products rather than different settings.
There are 518 dairy farmers in the town that owned 584 local-breeds of cows and 1240 crossbreed
cows in Arsi Robe town in 2016/17 fiscal year. Thus, there are 3.52 cows per HH or dairy farmers
in this town (Arsi Robe Town Urban Agriculture Office Report, 2016). The study is planned to be
carried out in the month of May, 2017.
35
Figure 1. Location of Oromia region, Arsi Zone and Robe Woreda within the national map of
Ethiopia, Oromia and Arsi zone respectively. Source: XYZ KLM ABC, 2007
3.2. Study Design

A descriptive cross-sectional study design was used in investigating the opportunities and
challenges/constraints of milk production and marketing among smallholder dairy farmers at the
specific study settings.
3.3. Populations
3.3.1. Source Population
All smallholder dairy farmers engaged dairy farming that were living Arsi Robe town in 2017 were
the source population.
3.3.2. Study Population
All smallholder dairy farmers that had milked cows and were the residents of the town and
accessible during the study period were the study populations.
36
3.4. Inclusion and Exclusion Criteria

3.4.1. Inclusion Criterion
Farmers that produce milk either for commercial purpose or for commercial and HH consumptions
were the inclusion criteria for the smallholder dairy farmers.
3.4.2. Exclusion Criterion
Milk production only for HH level consumption and raw milk production for processing purpose
at the HH level were the exclusion criteria for the farmers.
3.5. Sample Size and Sampling Techniques
3.5.1. Sample Size Determination
The sample size of smallholder dairy farmers is determined using the formula of sample size
determination for single proportion population, i.e.,
n = Z2p(1-p)/d2; Where,
n=Sample size for single proportional population
Z= the value of the normal distribution at 95 percent level of confidence; and hence Z=1.96.
p= the portability of randomly selecting the participant from the study population; and since it is
random; its value is equal to 0.5.
q=1-p=1.0-0.5; so q=0.5 and
d=is the possibility or chance of committing error while sampling; and as the level of confidence
is set at 90 percent, its value is 0.05.
So,
n=1.962X0.5X0.5/0.052
=384.
So, the sample size of the HHs of smallholder dairy farmers was 384.
Since the source population was finite, the calculated sample size was adjusted using the formula
for adjusting the sample size for finite population as shown below.
na= n/[1+n/N]; where,
N= Number of HHs of smallholder dairy farmers.
na= 384/[1+384/518]
n= 220.5
= 221.
37
Thus, 221 HHs of smallholder dairy farmers was the final sample size of farmers that were
included in the study. In terms of gender, 33.48 percent of the sample size was expected to be
females while the rest were males.
Table 1: Projected total number of study population and sample size of the study population per
Kebele administrative units in Arsi Robe town, Southeastern Ethiopia, 2017
S.N. List of Kebeles Population Total Dairy ni By gender Sampling technique
size HHs farmers F M
1 Kebele 01 14,904 1,609 266 113 41 72 Purposive & systematic
random
2 Kebele 02 14,131 1,526 252 108 33 75 Purposive & systematic
random
4 Total 29035 3135 518 221 74 147 Systematic random
3.5.2. Sampling Techniques

Purposive and systematic random sampling techniques were applied in the determining and
selecting the study participant smallholder dairy farmers from the Kebeles among the urban
smallholder dairy farmers as stated in Table 1 above.
3.6. Variables of the Study
3.6.1. Dependent Variables
The dependent variables of the study included:
 Raw milk selling price per liter
 Choice of milk marketing outlets
 Volume of milk produced
3.6.2. Independent Variables
The following were the independent variables of the study:
 Age,
 Sex,
 Market demand for raw milk,
 Awareness about milk markets and outlets,
 Number and breed types of cows owned,
 Access to Veterinary health services,
 Availability of information on milk market services,
38
 Knowledge of existing milk market outlets,

 Access to credit and loan services,
 Availability and cost of feeds and fodder,
 Accessibility of medication and vaccination services,
 Level of access to infrastructure,
 Accessibility of public transportation,
 Distance from nearest milk marketing centers, etc.
3.7. Data Collection Instruments
Required data for the study was collected using semi-structured questionnaires or interview
questionnaires and observational checklist. Most items of the instruments were developed based
on the systematic review of the empirical and theoretical literature. Observational checklist was
designed to supplement data that was collected through questionnaire/interview guideline.
Both the semi-structured questionnaires and the interview had six sections comprising of 43
question items and the observational checklist contained 13 items. Totally 56 question items were
used to collect necessary data. Semi-structured questionnaires were used for literate respondents
but the interview was used to collect data from illiterate and under-educated respondents.
However, observational checklist was used for all participants regardless of their educational status
and categories.
The first section of the questionnaire dealt with the socio-demographic characteristics of the
respondents. Second section items were used to assess and identify production volume per
smallholder dairy farmer per day and amount allotted for sales. The third section question items
were applied to investigate opportunities of milk marketing among selected smallholder dairy
farmers in the purposively selected three Farmers’ Association Kebeles. The fourth section
question items were applied to assess major market outlet or channels for smallholder dairy
farmers; and the fifth section items were used to identify either opportunities or constraints that
face smallholder dairy farmers for marketing milk they had produced. The last section of the
questionnaire/interview guideline question items were used to identify profile of existing access
of smallholder dairy farmers to veterinary and credit services as well as to dairy/agricultural
extension services.
39
3.8. Quality Control Measures

To ensure quality of the study and data to be collected, five quality control measures stated below
were applied.
Developing Specifications and Directions: Necessary specifications and instructions for
administration of the questionnaire were developed and implemented.
Training Assistant Data Collectors and Supervisor: The questionnaire items were administered
by assistant data collectors after they were trained on the contents of the questionnaire/interview
and how to administer them. Assistant data collector and the supervisor were recruited and selected
from students who had taken university entrance examination and accessible during data
collection.
3 Pre-Testing: The validity of the data gathering items was determined by running pre-test on five
percent of the calculated sample size of the study.
Using Double Data Entry Protocol: The quality of data was further controlled using the principle
of double data entry which involved entering data to the developed database and cross checking
the correctness of the data that are entered into the database.
3.9. Data Processing and Analysis Methods
3.9.1. Data Processing Methods
Collected data was checked thoroughly before consideration for the analysis. Incompletely filled
questionnaires, and questionnaires with high number of unfilled items were excluded from data
analysis; and the rest were corrected and used. Corrected data was edited and coded.
3.9.2. Data Analysis Methods
Processed data was analyzed using descriptive statistical and inferential statistical methods of data
analysis such as measures of central tendency, χ 2-test, ANOVA and others. Analyzed data was
presented using pictorial representations and tables.
3.10. Operationalized Definitions of Terms
Estimating market potential: total market potential is the sale, in physical or monetary units that
might be available to all firms in an industry during a given period under a given level of industry
marketing effort and given environmental condition.
Channel design: it refers to the length and width of the channel employed.
Demographic and physiographic characteristics: refers to targeted customers will form the
basis for channel-design decision. Answers to question such as what customers need as well as
40
why, when and how they buy are used to determine ways in which products should be made
available to generate competitive advantage.
Marketing environment consists of the task environment and the broad environments.
Demographic Segmentation Demographic segmentation divides markets into segments using
demographic factors such as gender.
Marketing Structure (MAP) Marketing structure refers to the methods of organizing a firm’s
marketing activities. Marketing structure establishes formal lines of authority, as well as the
division of labor within the marketing function.
Customer Delight occurs when actual performance exceeds the desired performance expectation.
This level of performance is rare and quite surprising when it occurs. Therefore, customers find it
to be memorable.
Customer Satisfaction occurs when actual performance falls within the zone of tolerance.
Satisfaction levels vary based on where performance falls within the zone (high or low).
Customer Dissatisfaction occurs when actual performance falls below the adequate performance
expectation. Depending upon the severity of the performance level, customers may go beyond
dissatisfaction to become frustrated or even angry. This too can be very memorable for customers.
3.11. Ethical Considerations
Necessary ethical clearance was obtained from St. Mary’s University (SMU), and also from Robe
Woreda and from the respective Kebele administrations prior to data collection and the data was
collected from selected respondents who have a willingness to participate. Their willingness or not
was asked and those who had the willingness had made to sign formal “Consent Form” designed
for same purpose. Great care and precautions were taken not to state items of the instrument in
such ways that they were free from gender-, age-, ethnic- & religion-based biases. Collected data
and information was kept confidential until the end of the study; and then after they were
destroyed.
41
CHAPTER FOUR: RESULTS

4.1. Socio-Demographic Characteristics of Respondents
The response rate of the study was 96.38 percent. Of the total respondents, 33.33 percent were
females. The mean age of the respondents was 33 [33.48±12.75] years. 38.97 percent of them were
in the age group ranging from 20 to 29 years. In terms of religion, majority [44.60%] of them was
Orthodox; and Protestants and Muslims constituted 7.51% and 42.25% percent respectively. Table
2 presented below detailed other socio-demographic characteristics of the respondents.
Table 2: Socio-demographic characteristics of the respondent smallholder dairy farmers who did
not sale and who sold fresh raw milk in Arsi Robe town, Southeastern Ethiopia, 2017
Milk, Non-Sellers Milk Sellers Both
Variables FEATURES
Fi % Fi % Fi %
M 14 66.67 128 66.67 142 66.67
Gender F 7 33.33 64 33.33 71 33.33
Total 21 100 192 100 213 100
Age ≤19 1 4.76 16 8.33 17 79.81
20-29 8 38.10 75 39.06 83 38.97
30-39 6 28.57 51 26.56 57 26.76
40-49 3 14.29 25 13.02 28 13.15
50-59 2 9.52 15 7.81 17 7.97
≥60 1 4.76 10 5.21 11 5.16
Total 21 100 192 100 213 100
Residence Kebele 01 11 52.38 98 51.04 109 51.17
places Kebele 02 10 47.62 94 48.96 104 48.83
Total 21 100 192 100 213 100
Religion Orthodox 9 42.86 86 44.79 95 44.60
Protestants 2 9.52 14 7.29 16 7.51
Muslims 7 33.33 83 43.23 90 42.25
Others 3 14.29 9 4.67 12 5.63
Total 21 100 192 100 213 100
Amhara 3 14.29 40 20.83 43 20.19
Gurage 1 4.76 21 10.94 22 10.33
Oromo 9 42.86 108 56.25 117 54.93
Tigre 2 9.52 12 6.25 14 6.57
Ethnicity Others 6 28.57 11 5.73 17 7.98
Total 21 100 192 100 213 100
Single 1 4.76 11 5.73 12 5.63
Married 6 28.57 132 68.75 138 64.79
Divorced 8 38.10 10 5.21 18 8.45
Marital Status Widow 6 28.57 23 11.98 29 13.62
Total 21 100 192 100 213 100
42
ICI 7 33.33 30 15.63 37 17.37

ICII 8 38.10 54 28.12 62 30.52
Gross ICIII 4 19.05 81 42.19 85 39.91
Monthly ICIV 2 9.52 19 9.90 21 9.86
Income ICV 0 0.00 8 4.17 8 3.76
Total 21 100 192 100 213 100
≤2 3 14.29 27 14.06 30 14.08
Family 3-4 5 23.81 46 23.96 51 23.94
5-6 6 28.57 56 29.17 61 28.64
Size 7+ 7 33.33 64 33.33 71 33.33
Total 21 100 192 100 213 100
4.2. Production and Sales Volume of Fresh Raw Milk

There were 518 dairy farmers in the town that owned 584 local-breeds of cows and 1240
crossbreed cows in Arsi Robe town in 2016/17 fiscal year. Thus, there are 3.52 cows per HH or
dairy farmers in this town (Arsi Robe Town Urban Agriculture Office Report, 2016). On the
average, local cows produce 2 liters of milk/day and 8 liters per cow per day. Therefore, estimated
annual production of raw milk per annum in Arsi Robe town is 2, 757, 360 liters per annum among
overall urban smallholder dairy farmers in Arsi Robe town.
Out of the total sampled smallholder dairy farmers, 90.14 percent of them produce milk for both
commercial and HH consumption purposes. The respondent farmers had 431 local breed and 859
crossbreed cows that constituted 1290 cows. Thus, there were 6.06 cows per urban dairy farmer or
HH. Of these cows, 33.41% of local type cows and 66.59% of cross breeds were owned by the
smallholder dairy farmers producing milk both for HH consumption and commercial purposes.
Out of the smallholder dairy farmers that produced milk both for HH consumption and commercial
purposes, only 6.57 percent had pasture land.
Of the respondents, smallholder dairy farmers (here after simply “the farmers”) that produced milk
for commercial purposes and HH consumption had higher [6.46] dairy cows than farmers that did
not sell fresh raw milk [2.38] on the average per HH in terms of local and cross breed dairy cows.
There were no differences in milk yield per cow per day between non-sellers and sellers with
respect to both types of dairy cows [Table 3].
On daily basis, the participant farmers produced 120,802.5 liters of milk [7.56% from local cows]
per annum while 1,476,195 liters of milk were produced for sales per annum among the
respondents from crossbreed cows. As a result, 1,596,997.5 liters of milk were produced by dairy
farmers that produce milk for both purposes per a year. Out of that volume of milk produced among
43
respondents, about 71 percent of the total production was allotted for sales purpose. Of the
production volume, production by sellers constituted about 96.24 percent. They allotted 46.63%
of total daily milk production for sales. Thus, just 1,596,997.5 liters of fresh milk was supplied for
sale per a year in Arsi Robe town by the smallholder urban dairy farmers [Table 4].
Table 3: Numbers and percentage values of cows, yield per cows and allotted sales volume among
the sellers and overall respondents in Arsi Robe town, Southeastern Ethiopia, 2017
Items Non-Sellers M. Sellers Total

Number of cows owned
Local breed type [Average] 18 [36.00%] 413 [33.31%] 431 [33.41%]
Cross breed type [Average] 32 [64.00%] 827 [66.69%] 859 [66.59%]
Total cows 50 [100%] 1240 [100%] 1290 [100%]
Milk yield per cow per day [in liters]
From Local breed 2.00 2.00 2.00
From Cross breed 9.50 9.50 9.50
Volume of raw milk allotted for sales per cow per day [in liters]
From Milk produce per Local breed
NA 75.00% 71.87%
[Percent of Total]
From Milk produce per Cross breed
NA 73.68% 70.94%
[Percent of Total]
Total sales [Percent of Total] NA 73.78% 71.01%
Of the total milk supplied for sales, 65% were made available to consumers through retailer
contractors and 15 percent through Wholesaler collectors; but the farmers directly sale twenty
percent to local HH consumer contractors at the site-of-production [Table 6 and Table 7]. Thus,
the major market outlets/channels for the respondent farmers included local HH consumer
contractors, retailer contractors and wholesaler collectors respectively [Table 4 and Table 6].
Table 4: Proportions of local and crossbred cows among the farmers and the farmers that sale fresh
milk, production and sales volumes per day and per year and selling prices to different actors by
Kebele 01 Kebele 02 Sum
Variables Category Features
fi fi fi
FARMERS PFHHCOa 98 94 192
44
PFBPb 11 10 21
TOTAL 109 104 213
Proportions of seller farmers 89.91 90.38 90.14
Local cows 221 210 431
IN NUMBERS PER TYPES OF COWS PER
Cross breed cows 439 420 859
Both cow types 660 630 1290
PFHHCO 10 8 18
LOCAL PFBP 211 202 413
SUB-TOTAL 221 210 431
SELELECTED KEBELES
PFHHCO 17 15 32
CROSS BREED PFBP 422 405 827
SUB-TOTAL 439 420 859
OWNED BY
PFHHCO 27 23 50
SELLERS,
COWS
BOTH PFBP 633 607 1240

TOTAL 660 630 1290
PFHHCO 3900 3120 7020
LOCAL PFBP 82290 78780 161070
SUB-TOTAL 86190 81900 168100
PFHHCO 41182.5 36337.5 77520
CROSS BREED PFBP 1022295 981112.5 2003407.5
PRODUCTION
SUB-TOTAL 1063477.5 1017450 2080927.5

CATEGORY
YEAR PER
PFHHCO 45082.5 39457.5 84540

BOTH PFBP 1104585 1059892.5 2164477.5
PER
TOTAL 1149667.5 167825 2249017.5

LOCAL PFBP 61717.5 59085 120802.5
SALES
CROSS BREED PFBP 753270 722925 1476195
VOLUME
SUM 814987.5 131377.5 1596997.5
LHHCsc 9.50 14.00 11.7041
FRESH RAW MILK
SELLING PRICES OF
PRODUCED
WSCsd 10.50 15.00 11.9384
PER A LITER TO
BY LOCAL
RCse 11.00 14.50 12.5485
COWS
SUB-TOTAL 10.50 14.375 12.0489
LHHCsc PRODUCED 9.50 13.50 10.6343
WSCsd BY CROSS 10.00 14.00 10.5013
45
RCse BREED COWS 10.50 13.75 11.2585

SUB-TOTAL 10.10 13.504 10.9809
LHHCsc PRODUCED 9.5000 13.8273 11.1940
WSCsd BOTH TYPES 10.1578 14.6025 10.0370
RCse OF COWS 10.4017 14.0955 11.7368
GRAND TOTAL 10.2339 13.9277 11.3853
Revenue LHHCsc PRODUCED 117263.25 165438.00 282701.25
generated from
WSCsd BY LOCAL 972053.25 132941.70 1104994.95
sales of milk by
category and as RCse COWS 441279.85 556875.69 998155.54
overall
SUB-TOTAL 1530596.35 855255.39 2385851.74
LHHCsc PRODUCED 1431213.00 1951897.50 3383110.50
WSCsd BY CROSS 1129908.50 1518147.12 2648055.62
RCse BREED COWS 5141064.08 6461137.65 11602201.73
SUB-TOTAL 7702185.58 9931182.27 17633367.85
LHHCsc PRODUCED 1548476.25 2117335.50 3665811.75
WSCsd BOTH TYPES 2101961.75 1651088.82 3753050.57
RCse OF COWS 5582343.93 7316393.04 12898736.97
GRAND TOTAL 9232781.93 11084817.36 20317599.29
Key: PFHHCOa= Producers for HH consumption only; PFBP b= Producers for both purposes; LHHCsc=
Local HH consumer contractors; WSCsd= Wholesaler collectors; and RCse= Retailer contractors.
All respondents had self-reported that they sold all amount of fresh milk they allotted for sales per
each day except during the main fasting period of Orthodox religion followers. Moreover, it was
determined that about 75 percent of them were asked for extra volume of sales each day and about
two and a quarter of liters could meet the extra demands of their major market outlets on daily
basis per each HH. Therefore, there was unmet demand of about 118,260 extra liters of fresh milk
to be marketed per annum [Table 5].
Table 5: Percent of fresh raw milk sold per day and volume of milk that meet extra demands among
main marketing channels per day per HH based on replies of respondents in Arsi Robe town,
ITEMS Sellers
Do you always sale the amount you allotted for sales per day? Yes 192 100%
No 0 0.00%
Yes 48 25.00
46
If “Yes”, have you ever been asked for more milk by No 144 75.00
If “Yes”,
your if you have enough cows or more productive cows
customers?
what amount of milk will meet the extra quantity of milk 2.25 LITERS PER DAY
demanded per day on the average by your customers?
Of the total respondents, just about 72.40 percent replied that they did not sale all milk at the
production sites. The responses of nearly two-third of them indicated that they transported unsold
volume of milk at on-production-site to local dairy cooperative. The largest volume of milk for
sales was handled by retailer contractors. That was followed by wholesaler collectors. Lowest
volume of milk was made available to consumers by dairy cooperatives [Table 6].
TABLE 6: Volume of fresh milk marketed to the major market outlets by the respondents in Arsi Robe
town, Southeastern Ethiopia, 2017
ITEMS Responses
Volume of milk %
For whom do sell raw milk [on-production-site]?
Retailer Contractors [RCs] 1038048.375 liters 65.00%
Local HH consumer contractors [LHHCs] 319399.5 liters 20.00%
Wholesaler Collectors [WSCs] 239549.625 liters 15.00%
Yes 53 27.60
Do you sell all produced milk at site-of-production area?
No 139 72.40
If “No”, do you transport unsold /extra/ all produced milk to Yes 139 100
off -production site marketing area? No 0 0.00
If “Yes”, to whom do you sell at off-production-site marketing areas?
Retailer Contractors 139 100.00
4.3. Opportunities of The Smallholder Dairy Farmers [Self-reported]

Based on the annual report of Arsi Robe Administrative and Urban Agriculture Office’ reports for
2016/17 fiscal year, 75.45 percent of the urban population have the capacity to afford a quarter of
one-liter milk for their family on daily basis which is consistent with the recommendation of FAO.
Accordingly, there was 1975 HHs in the both Kebeles that had no dairy cows [so that there were
18292 who can afford FAO’s daily recommended milk consumption]. Therefore, actual demand
for milk is about 3,098,598.71 L per annum; but annual sales volume supplied by the farmers in
both Kebeles was only 1,596,997.5L per a year. This implies that the gap between actual demand
for milk and actual supply is about 1,501,601.21L per annum. However, the gap between potential
47
demand for milk according to FAO’s recommendation and actual supply is about 2,509,826.5 liters.
Consequently, there are huge opportunities/demands [Potential gap = 2,509,826.5 liters; Actual gap
= 1,501,601.21 liters] for milk both in Arsi Robe town which can be exploited by the smallholder
dairy farmers living in both Kebeles. Therefore, they have high opportunity by marketing fresh
raw milk as marketers in both types of marketing milk [Table 7].
TABLE 7: Opportunities of fresh milk producers and marketer farmers in terms of potential and
actual demands among major the actors of marketing channels per year in Arsi Robe town,
Variable Category Settings Quantity
Demand Potential Urban 4, 106,824.00L
Actual Urban 3098598.71L
Supply Sales Volume Urban 1596997.5L
Gap Potential Urban 2,509,826.5L
Actual Urban 1501601.21L
Adjusted*= Forming community groups or union that collect milk and plays roles of both producers and
middlemen such as WSCs and DCs; and expenses including former plus cost to act as middlemen.
4.4. Analysis of the Effects of Various Factors on Milk Marketing

Lack of adequate pasture land [1.268±0.6437], high prices of animal feed or fodder
[1.438±0.8122], low level of access to milk marketing services & information [1.945±0.8732],
expensiveness of purchasing prices of inputs to dairy farms [2.162±0.9457], low access to credit
and loan services [2.476±1.1032], unavailability of cows feeds and fodder at reasonable prices
[2.824±1.1322], low raw milk selling prices to the main market channels [3.513±1.3426], low
bargaining power over middlemen [4.129±1.6473], access to agricultural/dairy extension services
[7.887±2.9451] were the main self-reported constraints among the respondents for marketing fresh
raw milk to the major middleman actors and LHHCs [Table 8].
Weighted average daily and annual expenses per types of cows for feeds and fodder, veterinary
services and drugs, total labor including family members’ labor, and overall costs for all categories
are presented in table 8 below. As evident from the table, both daily and yearly expenses for all
the feeds and fodder, and labor categories of costs for crossbred dairy cows were higher than that
of local cows. But expenses for both types of cows for veterinary services and drugs were the same
on the basis of costs incurred per a cow per a day. The respondents that transported a portion of
fresh milk they allotted for sales to off-production marketing places found to use four different
kinds of containers [Table 8].
48
Table 8: Appropriate descriptive response values for question items of the section five of the instruments
by the study participants in Arsi Robe town, Southeastern Ethiopia, 2017
Items Non-Sellers Sellers Total
F F F
i % i % i %
C1 NA NA 67 48.20 67 48.20%
In what type of containers do you
C2 NA NA 31 %
22.30 31 22.30%
transport milk to off-production-site
C3 NA NA 25 %
17.99 25 17.99%
markets? %
C4 NA NA 16 11.51 16 11.51%
Rank the following milk production inputs and infrastructure as well as %
services in their decreasing
order as constraint to your milk marketing? [1= Highest constraint; 20= Lowest Constraint][Reported
as mean and SD] [Only among milk sellers[
Decision at p-value
t- of 0.05 level of
Variable Mean SD value significance
a. Water [Mean and SD] 17.304 6.8888 6.440 Reject Ho
b. Electricity [Mean] 16.431 6.6226 4.905 Reject Ho
c. Low access to infrastructure such as 17.804 2.6684 - Accept Ho
d. road [Mean]
High price of Animal feed and 1.438 0.8122 -1.816 Reject Ho
e. High yielding
fodder [Mean] cross breed [Mean] 13.111 4.9634 8.755
85.69 Accept Ho
f. Lack of Pasture land [Mean] 1.268 0.6437 - Reject Ho
5
g. Storage equipment [Mean] 8.995 7.3895 4.133
238.7 Accept Ho
h. Public transport [Mean] 18.776 3.5068 8.405 Accept Ho
00
i. Low access to market information 15.945 2.8732 - Accept Ho
j. Veterinary
[Mean] services [Mean] 15.308 5.8561 -3.060 Accept Ho
k. Spoilage [Mean] 16.606 5.3760 -13.66 Accept Ho
l. Low raw milk price [Mean] 3.553 1.3426 -28.10 Reject Ho
5
m. Low bargaining power over 4.129 1.6473 -86.11 Reject Ho
5
n. Access to credit and loan services
middlemen 2.476 1.1032 -64.36 Reject Ho
7
o. Access
[Mean] to agricultural/dairy extension 7.887 2.9451 -121.0 Reject Ho
9
p. Availability
services of cows feeds and fodder 2.824 1.1322 -14.76 Reject Ho
53
q. Purchasing
[Mean] prices of inputs [Mean] 2.162 0.9457 -112.8 Reject Ho
7
r. Access to technology [Mean] 11.020 3.8697 2.237
146.7 Reject Ho
37
s. Seasonal variation in selling prices of 17.631 7.1038 16.70 Reject Ho
40
t. Availability
raw milk of AI service [Mean] 19.006 7.6499 18.50
7 Accept Ho
6
Shortage of Water and electricity, high price of animal feed and fodder, lack of pasture land, low
raw milk price, low bargaining power over middlemen, inadequacy of access to credit and loan
services and access to agricultural/dairy extension services, high purchasing prices of inputs and
inaccessibility to technology were identified as significant constraints for producing and marketing
among the respondents of the study [Table 8 above].
49
The study determined that milk marketing and main milk market channels had statistically
significant dependency on the size of pasture land the farmers owned [χ 2= 7.625>χ2Crit [3.841]],
extent of access to veterinary services [χ 2= 10.566>χ2Crit [3.841]] and to credit services [χ2=
77.527>χ2Crit [3.841]], availability of advice on milk marketing and market outlets [χ 2= 5.934>χ2Crit
[3.841]], and the kinds/persons that provided technical advice regarding milk production and
marketing to them [χ2= 9.471>χ2Crit [7.815]] [Table 9].
Table 9: Milk production and marketing dependency test on selected variables of the study using
χ2-test among smallholder dairy farmers in Arsi Robe town, Southeastern Ethiopia, 2017
Variable Options NSrsa Sellersb Total df χ2calc χ2Crit Decision

O 16 85
enough pasture
have
Yes 101
E 10 91
O 5 107 1 7.625 3.841 Reject H0
you
No 112
E 11 101
land?
Do
Total 21 192 213

Yes O 10 157
Do you access to
167
E 16 151
1 10.566 3.841 Reject H0
veterinary
No O 11 35
services?
46
E 5 41
Total 21 192 213
Yes O 19 19
Do you access to
38
credit services?
E 4 34
No O 2 173 1 77.527 3.841 Reject H0
175
E 17 158
Total 21 192 213
Yes O 10 12
from
If “Yes”, do you
22
E 9 13
providers?
No O 6 10 1 0.442 3.841 Accept H0

equitable
16
services
receive
E 7 9
Total 16 22 38
Yes O 8 9 17
If “Yes”, was it
E 7.7 9.3
1 0.094 3.841 Accept H0
adequate?
No O 2 3 5
E 2.3 2.7
Total 10 12 22
Yes O 10 91
is
a
101
limiting factor?
E 11 90
“No”,
No O 9 65 1 0.242 3.841 Accept H0

74
finance
E 8 66
Total 19 156 175
If
O 2 71
50
7 66 73 Yes E
Do you have
and market
to advice on
Reject H0
marketing
19 121 140 No O 1 5.934 3.841
outlets?
14 126 E
Total 21 192 213 milk
Model O 11 60
milk
From whom do you get technical
71
framers E 7 62
production and marketing?
Neighborhood O 9 46 55
regarding
farmers E 5 50
Mass Media O 1 31 3 9.471 7.815
32
E 3 29
Reject H0
AEWs/DEWs O 8 126 134
advice
E 13 121
Total 29 263 292
DEWs O 1.5 12.5
If “Yes” from item No. 11 above,
the providers of advice and
information on milk production and
14
E 1.5 12.5
AEWs O 6.5 48.5 55
marketing and market outlets?
E 6 49
Dairy O 0.5 1.5 2
E 0.4 0.6 4 1.829 9.488
cooperative
Mass Media O 0.5 4.5 5
E 0.6 3.4
Accept H0
Others O 7.5 66.5 74
specify
E 8 66
Total 16.5 133.5 150
NSrsa= Non-sellers of fresh milk; Sellersb= Milk seller farmers.
4.5. Identified Opportunities for Marketing Milk
High demand for fresh raw milk among market outlets & consumers, selling fresh raw milk
through RCs market outlets, forming small groups that collect milk and act as WSCs, selling fresh
milk to other middlemen instead to DCs, free options/alternatives to select the major milk
marketing outlets, low demand for packed, processed and powder milk among consumers, absence
of strong competitors in the area, absence of formally levied income tax on dairy farmers selling
milk informally, selling fresh raw milk through WSCs market outlets and cheaper labor power
were the main opportunities for marketing fresh raw milk among the respondents of the study
[Table 10 based on results presented in Tables 7, 8 and 9].
4.6. Identified Opportunities for Producing Milk
Opportunities of the farmers to produce milk in Arsi Robe town include presence of huge amount
of potential and actual demand for milk, availability of artificial insemination and veterinary
services as well as advice on milk production and marketing outlets, and absence of seasonal
51
fluctuation of demand and price of raw milk in the town besides abundantly presence of cows’
feeds and fodder with ease access level except high prices.
4.7. Identified Constraints for Marketing Milk
Identified major constraints of milk marketing among the respondent farmers included large
distance from areas of high demands, inequitable access to credit services, lack of adequate pasture
land, low level of access to milk marketing services & information, low access to infrastructure such
as roads, absence of technical advice on milk production, handling & marketing, high prices of animal
feed or fodder, low raw milk selling prices to the main market channels, low bargaining power over
middlemen, low access to credit and loan services, access to agricultural/dairy extension services,
availability of cows feeds and fodder at reasonable prices and expensiveness of purchasing prices of inputs
to dairy farms [Table 10 based on results presented in Tables 7, 8 and 9].
4.8. Identified Constraints for Producing Milk

Constraints of the farmers for producing milk in Arsi Robe town include low selling price of raw
milk, low bargaining ability over the middlemen and absence of smallholders’ urban dairy farmers’
milk cooperative that collect and sale raw milk as well as process unsold raw milk. Moreover, lack
of adequate financial resources to keep and store milk hygienically and use modern technological
inputs for milk production, and pasture land as well as high cost of cows’ feeds and fodder are
reported by the participants as constraints to effectively and efficiently engage in milk production
and dairy farming socio-economic activity in Arsi Robe town.
Table 10: Identified opportunities and constraints both for producing and marketing milk among
List Of Major Identified Opportunities And Constraints
Opportunities
High demand for fresh raw milk among market outlets & consumers
Selling fresh raw milk through LHHCs outlets at on-site-of-production
Free options/alternatives to select the major milk marketing outlets
Absence of strong competitors in the area
Absence of formally levied income tax on dairy farmers selling milk informally
Cheaper labor power and availability of dairy cows’ feeds and fodder
Constraints
Inequitable access to credit services
Lack of adequate pasture land
Low level of access to milk marketing services & information
Low access to infrastructure and modern technological inputs
Absence of technical advice on milk production, handling & marketing
52
High price of animal feeds or fodder

Low raw milk selling prices to the main market channels
Low bargaining power over middlemen
Low access to credit and loan services
Low access to agricultural/dairy extension services
Expensive purchasing prices of inputs
Absence of dairy cooperatives
53
CHAPTER FIVE: DISCUSSION

crossbreed cows in Arsi Robe town in 2016/17 fiscal year. There are 3.52 cows per HH or dairy
farmers in this town. On the average, local cows produce 2 liters of milk/day and 8 liters per cow
per day. Out of the total sampled smallholder dairy farmers, 90.14 percent of them produce milk
for both commercial and HH consumption purposes. The respondent farmers had 431 local breed
and 859 crossbreed cows that constituted 1290 cows. Thus, there were 6.06 cows per urban dairy
farmer or HH. Of these cows, 33.41% of local type cows and 66.59% of cross breeds were owned
by the smallholder dairy farmers producing milk both for HH consumption and commercial
purposes. Smallholder dairy farmers (here after simply “the farmers”) that produced milk for
commercial purposes and HH consumption had higher [6.46] dairy cows than farmers that did not
sell fresh raw milk [2.38] on the average per HH in terms of local and cross breed dairy cows.
There were no differences in milk yield per cow per day between non-sellers and sellers with
respect to both types of dairy cows. The findings of Dejene Takele and Tamiru Amanu (Aug.,
2015) revealed that smallholder dairy farmers in the lowland and mid-highland agro-ecologies of
Borana zone supplied an average of 1.11 and 0.05, and 0.77 and 0.04 liter of fresh cow milk to the
market during the wet and dry season per a day , respectively. The discrepancy in milk supply
along the agro-ecologies was probably the cultural taboos which highly restricted fresh milk
marketing in mid-highland. Larger population of milking cow in lowland than mid-highland agro-
ecology was also substantiated the positive and significant contribution toward the higher
marketable milk volume and market participation in the former agro-ecology. The study conducted
by Holloway and Ehui (2002) and Gizachew (2005) was coinciding with this finding by justifying
that possession of larger number of dairy cows leads to increased milk production which in turn
declines the percentage share of consumption by improving the percentage share of milk sale.
Thus, dairying in Eastern Africa essentially remains a domestic, or even localized, business. In the
Eastern Africa Community (EAC), only 10 to 20% of the raw milk supply, depending on the
country and sources, is marketed and distributed through normal channels, whereas less than one
per cent of dairy products are exporters within or outside the region. To a large extent, this is
explained by the fact that milk and dairy products are difficult to trade due to their perishability,
tropical temperatures that exacerbate the perishability issue and also to the relatively high costs of
trading across borders in the region (4).
54
On daily basis, the participant farmers produced 120,802.5 liters of milk per annum while
1,476,195 liters of milk were produced for sales per annum among the respondents from
crossbreed cows. As a result 1,596,997.5 liters of milk were produced by dairy farmers that
produce milk for both purposes per a year. Out of that volume of milk produced among
respondents, about 71 percent of the total production was allotted for sales purpose. Of the
production volume, production by sellers constituted about 96.24 percent. They allotted 46.63%
of total daily milk production for sales. Thus, just 1,596,997.5 liters of fresh milk was supplied for
sale per a year in Arsi Robe town by the smallholder urban dairy farmers.
Of the total milk supplied for sales, 65% were made available to consumers through retailer
contractors and 15 percent through Wholesaler collectors; but the farmers directly sale twenty
percent to local HH consumer contractors at the site-of-production. Thus, the major market
outlets/channels for the respondent farmers included local HH consumer contractors, retailer
contractors and wholesaler collectors respectively. They added that informal actors can collect the
milk from the farms, offer relatively high prices as well as cash payments and credit to dairy
farmers and milk hubs, thanks to their lower marketing costs. This competition, in turns, makes it
difficult for different operators (including collection centers) to establish and maintain formal
value chain relations and ensure that the raw milk supply is stable and that certain quality standards
are followed. On the one hand, informal channels provide undeniably benefits to farmers and
traders by allowing them to secure their livelihoods and to low-income consumers by supplying
them with affordable milk; but on the other hand it can constitute an obstacle to the development
of value chains. Besides, informality may entail a loss of fiscal receipts, makes it difficult to apply
regulatory standards, and create food safety risks. Unlike in Kenya and Uganda, dairy cooperatives
have a minimal role in milk marketing in Ethiopia. The dairy cooperative is the most common
structure for milk marketing in Kenya and Uganda [Kenya DMP, 2010; Bingi and Tondel, 2015].
These could be justified by the fact that the respondents of the current survey also stated that
looking for the route with favorable price was similar to the findings of Belay Duguma and G.P.J.
Janssens (2014) who reported that the better the price offered by milk market channel, the more a
household prefers that outlet for accessing and selling milk. Besides the attractive selling price,
producers were considering sustainability of the outlet which was attainable via informal channels
than the formal ones. Most of the producers were preferred to sell their milk through informal
chain as long as there was a rarely organized formal channel for receiving dairy products. Even
55
the formally organized channels, particularly locally available cooperatives, were abstained from
dairy product purchase during supply shortage because of production reduction which could not
be sufficient to make the business viable especially during feed deficit. This finding has similarity
with the finding of Van der Valk and Tessema (2010) who reported that 98% of milk produced in
rural area was sold through informal chain from whom they rupee attractive payments than through
formal chain.
Based on the annual report of Arsi Robe Administrative and Urban Agriculture Office’ reports for
2016/17 fiscal year, 75.45 percent of the urban population have the capacity to afford a quarter of
one-liter milk for their family on daily basis which is consistent with the recommendation of FAO.
Accordingly, there was 1975 HHs in the both Kebeles that had no dairy cows [so that there were
18292 who can afford FAO’s daily recommended milk consumption]. Therefore, actual demand
for milk is about 3,098,598.71 L per annum; but annual sales volume supplied by the farmers in
both Kebeles was only 1,596,997.5L per a year. This implies that the gap between actual demand
for milk and actual supply is about 1,501,601.21L per annum. However, the gap between potential
demand for milk according to FAO’s recommendation and actual supply is about 2,509,826.5 liters.
Consequently, there are huge opportunities/demands [Potential gap = 2,509,826.5 liters; Actual gap
= 1,501,601.21 liters] for milk both in Arsi Robe town which can be exploited by the smallholder
dairy farmers living in both Kebeles. Therefore, they have high opportunity by marketing fresh
raw milk as marketers in both types of marketing milk. These meant that t here were unmet potential
and actual demands of about 1,501,601.21 liters and 2,509,826.5 liters of fresh milk to be marketed per
annum based on replies of the respondents. Therefore, they have high opportunity by marketing fresh
raw milk as marketers in both types of marketing milk. All respondents had self-reported that they
sold all amount of fresh milk they allotted for sales per each day except during the main fasting
period of Orthodox religion followers. Moreover, it was determined that about 75 percent of them
were asked for extra volume of sales each day and about two and a quarter of liters could meet the
extra demands of their major market outlets on daily basis per each HH. Therefore, there was
unmet demand of about 118,260 extra liters of fresh milk to be marketed per annum.
significant dependency on the size of pasture land the farmers owned, extent of access to veterinary
services and to credit services, availability of advice on milk marketing and market outlets, and
the kinds/persons that provided technical advice regarding milk production and marketing to them.
56
Opportunities of the farmers to produce milk in Arsi Robe town include presence of huge amount
of potential and actual demand for milk, availability of artificial insemination and veterinary
services as well as advice on milk production and marketing outlets, and absence of seasonal
fluctuation of demand and price of raw milk in the town besides abundantly presence of cows’
feeds and fodder with ease access level except high prices. High demand for fresh raw milk among
market outlets and consumers, selling fresh raw milk through RCs market outlets, forming small
groups that collect milk and act as DCs, free options/alternatives to select the major milk marketing
outlets, low demand for packed, processed and powder milk among consumers, absence of strong
competitors in the area, absence of formally levied income tax on dairy farmers selling milk
informally, selling fresh raw milk through WSCs and RCs market outlets and cheaper labor power
were the main opportunities for marketing fresh raw milk among the respondents of the study.
With these regard FAO statistics shows a growing milk demand at a higher rate than milk
production in Africa. Between the years 1990 and 2004, the demand for milk and dairy products
in Africa was growing at an average rate of 4.0% per annum; meanwhile production only grew at
a rate of 3.1%. Milk imports have also been increasing between 1990 and 2004 at a rate of 2.1%
per annum, showing that the gap between domestic production and consumption is also widening
up. Growth in milk consumption in Africa is pushed both by a growth in population (of 2.8% per
annum) and a small growth in per capita milk consumption of (0.8% per annum) between 1990
and 2004. Due to population growth, land shortage in urban areas and increasing interest in
production and consumption, dairy production needs to increase greatly. The high milk demand in
urban areas drive milk production systems in areas closer to big cities to focus on milk marketing,
cost minimization and profit maximization (Fonteh et al, 2005). Unfortunately, these urban areas
with the highest market potential for milk are usually heavily populated and have limited land
which is preferentially allocated to other activities than dairying. Therefore dairying is forced to
shift to the rural areas where there is a weaker market for milk. The lack of adequate transportation
and cooling infrastructure in rural areas accounts for a loss of large volumes of milk in developing
countries (Ndambi et al, 2007). Birachi (2006) showed that, on the one hand such farmers lack
information on markets and prices and have a weak market influence and on the other hand, retail
outlets incur high transaction costs since they deal with many small scale producers.
Thus, the findings of the study determined that high demands for fresh raw milk among market
outlets & consumers, selling fresh raw milk through RC marketing outlets, forming small groups
57
that collect milk and act as DCs, low demand for packed, processed and powder milk among
consumers, absence of strong competitors in the area, absence of formally levied income tax on
dairy farmers selling milk informally, selling fresh raw milk through DCs market outlets and
cheaper labor power were the main opportunities for marketing fresh raw milk among the
respondents of the study. Coinciding with this Dejene Takele and Tamiru Amanu (2015) reported
that the unmet demand for milk and milk products at local and export market; the current initiation
of the government in developing fundamental infrastructural facilities for dairy development and
the existence of relatively many actors in the area were the opportunities which could enhance the
competitiveness of milk marketing in the pastoral area of Borana zone. Besides, it could provide
income‐earning opportunities for milk collectors, processors and transporters in a sustainable
manner. Investing in the processing of milk and milk products such as Dhama/Arera, Butter and
Ayib could guarantee returns to both the investor and small scale milk producers for the
substitution of the currently imported milk by‐products (value added products) with very high price
tags.
Moreover, in 2009 average cow milk production was estimated at only 1.54 liters/cow per day
(CSA, 2009), and the per capita milk consumption was only about 16 kg/year, which is much lower
than African and world per capita averages of 27 kg/year and 100 kg/year, respectively
58
Shortage of Water and electricity, high price of animal feed and fodder, lack of pasture land, low
raw milk price, low bargaining power over middlemen, inadequacy of access to credit and loan
services and access to agricultural/dairy extension services, high purchasing prices of inputs and
inaccessibility to technology were identified as significant constraints for producing and marketing
among the respondents of the study. Constraints of the farmers for producing milk in Arsi Robe
town include low selling price of raw milk, low bargaining ability over the middlemen and absence
of smallholders’ urban dairy farmers’ milk cooperative that collect and sale raw milk as well as
process unsold raw milk. Moreover, lack of adequate financial resources to keep and store milk
hygienically and use modern technological inputs for milk production, and pasture land as well as
high cost of cows’ feeds and fodder are reported by the participants as constraints to effectively
and efficiently engage in milk production and dairy farming socio-economic activity in Arsi Robe
town. Identified major constraints of milk marketing among the respondent farmers included large
to dairy farms. Similarly, the findings of other independent studies ascertained that milk marketing
by smallholder dairy farmers was impeded with some constraints such lack of market oriented
producer organization, and nonfunctioning marketing infrastructure among many others according
to YONAD (2009). Similarly, the current study also evidenced that marketing of milk was
characterized by informal system where the producers were selling milk on the gate of dairy farms;
at market with no facilities, and individually taking to the home of their contractual customers.
However, study findings of Luoga, Kurwijila, Nyange, and Ryoba (2007) revealed that market
access as measured by travel time and frequency of milk sales had a significant (P<0.01) and highly
significant (P<0.001) influence on volume of milk sold per household respectively. It also
59
identified that lack of information and access to extension services, also limited farmers'
participation in dairy input and output markets. Again, unattractiveness of selling price and non
sustainability of the outlet were the basic limiting factors in preferring the actors for whom to sell.
Significant variation of market price was observed along the agro-ecology and the main seasons
within the agro-ecology (P < 0.05) where there was seasonal based negotiation in determining
price in both agro-ecology and the recently emerging quality related pricing mechanism in the
capital towns of the districts of lowland agro-ecology. Diversifying milk was economically
attractive business in lowland besides managing the seasonal fluctuations of supply and demand
for efficient exploitation of market opportunity. However, the financial profitability in mid-
highland agro-ecology was apparently unfeasible probably from the bulkiness of utilized fresh
milk than elongating the shelf life of surplus product [Dejene Takele and Tamiru Amanu (2015)].
Consequently, despite the favorable trends for dairying in East Africa in general and in Arsi Robe
town in particular, there are a number of serious issues that constrain milk marketing among
smallholder dairy farmers in the rural areas. Generally, the productivity of dairy farmers is
relatively low. While the small scale of dairy farm operations and the lack of broad-based use of
modern farm technologies/practices and improved breeds explain a great deal of the productivity
60
CHAPTER SIX: SUMMARY, CONCLUSIONS AND

RECOMMENDATIONS
6.1. Summary
crossbreed cows in Arsi Robe town in 2016/17 fiscal year. Thus, there are 3.52 cows per HH or
dairy farmers in this town. On the average, local cows produce 2 liters of milk/day and 8 liters per
cow per day. Out of the total sampled smallholder dairy farmers, 90.14 percent of them produce
milk for both commercial and HH consumption purposes. The respondent farmers had 431 local
breed and 859 crossbreed cows that constituted 1290 cows. Thus, there were 6.06 cows per urban
dairy farmer or HH. Of these cows, 33.41% of local type cows and 66.59% of cross breeds were
owned by the smallholder dairy farmers producing milk both for HH consumption and commercial
purposes. Only 6.57 percent had pasture land. Smallholder dairy farmers (here after simply “the
farmers”) that produced milk for commercial purposes and HH consumption had higher dairy cows
than farmers that did not sell fresh raw milk on the average per HH in terms of local and cross
breed dairy cows. There were no differences in milk yield per cow per day between non-sellers
and sellers with respect to both types of dairy cows.
The participant farmers produced 120,802.5 liters of milk per annum while 1,476,195 liters of milk
were produced for sales per annum among the respondents from crossbreed cows. As a result,
1,596,997.5 liters of milk were produced by dairy farmers that produce milk for both purposes per
a year. About 71 percent of the total production was allotted for sales purpose. Of the production
volume, production by sellers constituted about 96.24 percent. They allotted 46.63% of total daily
milk production for sales. Thus, just 1,596,997.5 liters of fresh milk was supplied for sale per a
year. 65% were made available to consumers through retailer contractors and 15 percent through
Wholesaler collectors; but the farmers directly sale twenty percent to local HH consumer contractors
at the site-of-production. Thus, the major market outlets/channels for the respondent farmers
included local HH consumer contractors, retailer contractors and wholesaler collectors
respectively. Just about 72.40 percent replied that they did not sale all milk at the production sites.
The responses of nearly two-third of them indicated that they transported unsold volume of milk
at on-production-site to local dairy cooperative. The largest volume of milk for sales was handled
by retailer contractors followed by wholesaler collectors.
61
The gap between potential demand for milk according to FAO’s recommendation and actual
supply is about 2,509,826.5 liters. Consequently, there are huge opportunities/demands [Potential
gap = 2,509,826.5 liters; Actual gap = 1,501,601.21 liters] for milk both in Arsi Robe town which
can be exploited by the smallholder dairy farmers living in both Kebeles. Therefore, they have
high opportunity by marketing fresh raw milk as marketers in both types of marketing milk.
significant dependency on the size of pasture land the farmers owned, extent of access to veterinary
services and to credit services, availability of advice on milk marketing and market outlets, and
the kinds/persons that provided technical advice regarding milk production and marketing to them.
High demand for fresh raw milk among market outlets & consumers, selling fresh raw milk
through RCs market outlets, forming small groups that collect milk and act as DCs, free
options/alternatives to select the major milk marketing outlets, low demand for packed, processed
and powder milk among consumers, absence of strong competitors in the area, absence of formally
levied income tax on dairy farmers selling milk informally, selling fresh raw milk through WSCs
and LHHCs market outlets and cheaper labor power were the main opportunities for marketing
fresh raw milk among the respondents of the study. Opportunities of the farmers to produce milk
in Arsi Robe town include presence of huge amount of potential and actual demand for milk,
availability of artificial insemination and veterinary services as well as advice on milk production
and marketing outlets, and absence of seasonal fluctuation of demand and price of raw milk in the
town besides abundantly presence of cows’ feeds and fodder with ease access level except high
prices.
Lack of adequate pasture land, high prices of animal feed or fodder, low level of access to milk
marketing services & information, expensiveness of purchasing prices of inputs to dairy farms,
low access to credit and loan services, unavailability of cows feeds and fodder at reasonable prices,
low raw milk selling prices to the main market channels, low bargaining power over middlemen,
access to agricultural/dairy extension services were the main self-reported constraints among the
respondents for marketing fresh raw milk to the major middleman actors and LHHCs. Also other
identified major constraints of milk marketing among the respondent farmers included large
62
to dairy farms. Shortage of Water and electricity, high price of animal feed and fodder, lack of
pasture land, low raw milk price, low bargaining power over middlemen, inadequacy of access to
credit and loan services and access to agricultural/dairy extension services, high purchasing prices
of inputs and inaccessibility to technology were identified as significant constraints for producing
and marketing among the respondents of the study. Constraints of the farmers for producing milk
in Arsi Robe town include low selling price of raw milk, low bargaining ability over the middlemen
and absence of smallholders’ urban dairy farmers’ milk cooperative that collect and sale raw milk
as well as process unsold raw milk. Moreover, lack of adequate financial resources to keep and
store milk hygienically and use modern technological inputs for milk production, and pasture land
as well as high cost of cows’ feeds and fodder are reported by the participants as constraints to
effectively and efficiently engage in milk production and dairy farming socio-economic activity
in Arsi Robe town.
6.2. Conclusions
High demands for fresh raw milk among market outlets & consumers, selling fresh raw milk
through RC marketing outlets, free options/alternatives to select the major milk marketing outlets,
low demand for imported packed, processed and powder milk among consumers, selling fresh raw
milk through WSCs and LHHCs market outlets and cheaper labor power were the main
opportunities among others for marketing fresh raw milk.
The main constraints for marketing milk included large distance from areas of high demands,
inequitable access to credit services, lack of adequate pasture land, low level of access to milk
marketing services & information, low access to infrastructure and dairy farm technological inputs,
absence of technical advice on milk production, handling & marketing, high prices of animal feed
or fodder, low raw milk selling prices to the main market channels, low bargaining power over
unavailability of cows feeds and fodder at reasonable prices and expensiveness of purchasing
prices of inputs to dairy farms.
63
6.3. Recommendations
Based on the major findings of the study the following recommendations are worth mentionable.
1. Appropriate intervention strategies need designing and implementation to tackle the
adverse effects of the constraints on milk marketing among smallholder dairy farmers,
2. Due attention has to be given to smallholder dairy farmers to ensure equitable access to
credit and loan services in order to empower them,
3. Necessary milk marketing information services and technical advices regarding milk
production and marketing should be organized for smallholder dairy farmers and should
be launched as soon as possible,
4. The perishable nature of milk was found more appropriate to rely on the local rather than
other market opportunity. As long as there was lack of regulations on the hygienic
production and marketing of milk coupled with lack of proper handling of products during
production, storage, transportation and marketing, consumption of such products would
have been a potential health and financial drawbacks. There was complain on the absence
of milk and milk product processing and cooling infrastructures to safeguard milk from
spoiling and to further elongate its shelf life. Similarly, absences of training package,
especially for the community in the very remote but with noticeable milk production
potential, concerning hygienic milking and milk management; the importance of
marketing, and accessible marketing potentials were also affecting the marketability of
milk product that weaken the capacity of pastoral resource based means for livelihood
security and diversity (Wabekbon Development Consultants Plc, 2009). These have some
paramount implications for national and regional policy or law maker bodies and the
government;
5. Activities of already deployed AEWs/DEWs need re-evaluation and consideration as to
what extent they have undertaken their duties and responsibilities, and
6. Necessary technical advice and support should be delivered for milk seller rural farmers to
form small community level groups that undertake the roles of WSCs and sellers for
marketing milk hygienically and safely to the end point consumers.
64
REFERNCES
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‫درج دمسى‬

ASSESSMENT OF OPPORTUNITIES AND CONSTRAINTS OF MILK

BY: DEREJE DEMISSIE SHASHO (M.Sc.)

Name: Dereje Demissie Shasho

Date of Birth: February 08, 1973

Place of Birth: Ligeba, Lode Hetosa, Arsi Zone, Ethiopia

Marital Status: Bachelor

Health Status: Excellent

Address: Arsi Robe town, Arsi Zone, Ethiopia

Mobile Phone: +251922304635; +251954687014

Email addresses: esandemissie@gmail.com; or esandemissie951@gmail.com

SN Level Name of University/school Year of attendance Awards

Employer organization Position Main Responsibilities Duration

- Assisting in designing database and

Area of experience &

- Assessing personal hygiene status of individuals and food handlers in urban

E: Computer Related Skills and Knowledge

Area name Skills & Competencies Examples of are if relevant

Language type Skills

[1]. Retrospective Evaluation of Ceftriaxone Utilization in Inpatient Wards at Asella

1. Prof. Endashaw Bekele (PhD); AAU, Department of Biology, Tel.: +251947407077.

3.4. Inclusion and Exclusion Criteria 37

ABBREVIATIONS AND ACRONYMS

CHAPTER ONE: INTRODUCTION

specific study settings?

CHAPTER TWO: REVIEW OF RELATED LITERATURE

CHAPTER THREE: STUDY DESIGN AND METHODOLOGY

3.2. Study Design

3.4. Inclusion and Exclusion Criteria

3.5.2. Sampling Techniques

 Knowledge of existing milk market outlets,

3.8. Quality Control Measures

CHAPTER FOUR: RESULTS

ICI 7 33.33 30 15.63 37 17.37

4.2. Production and Sales Volume of Fresh Raw Milk

Items Non-Sellers M. Sellers Total

BOTH PFBP 633 607 1240

SUB-TOTAL 1063477.5 1017450 2080927.5

PFHHCO 45082.5 39457.5 84540

TOTAL 1149667.5 167825 2249017.5

RCse BREED COWS 10.50 13.75 11.2585

4.3. Opportunities of The Smallholder Dairy Farmers [Self-reported]

4.4. Analysis of the Effects of Various Factors on Milk Marketing

Variable Options NSrsa Sellersb Total df χ2calc χ2Crit Decision

Total 21 192 213

No O 6 10 1 0.442 3.841 Accept H0

No O 9 65 1 0.242 3.841 Accept H0

4.8. Identified Constraints for Producing Milk

High price of animal feeds or fodder

CHAPTER FIVE: DISCUSSION

CHAPTER SIX: SUMMARY, CONCLUSIONS AND

RoR/MINAGRI 2013, National Dairy Strategy, Kigali, Republic of Rwanda/Ministry of

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